Buy Dalmia Bharat Ltd for the Target Rs 2,250 by Motilal Oswal Financial Services Ltd
Better realizations drive EBITDA beat Demand improving; targeting to grow in line with industry in FY27
* Dalmia Bharat’s (DALBHARA) 1QFY27 performance was above our estimates, led by higher-than-estimated realizations. Revenue rose ~7% YoY to INR38.9b (+4% vs. estimates). EBITDA declined ~9% YoY to INR8.1b (~10% beat). OPM contracted 3.6pp YoY at ~21% (+1.1pp vs. our estimate), while EBITDA/t stood at INR1,059 (down ~16% YoY; +8% vs. our estimates). PAT (adjusted for one-off costs) declined ~13% YoY to INR3.2b (+51% vs. our estimate, led by higher other income and lower tax rate).
* Management remained constructive on the FY27 outlook, expecting industry demand growth of ~7-8% YoY. It anticipates organic volumes to be broadly in line with industry growth, with additional upside from the ramp-up of the acquired assets and organic expansions. Integration of the acquired assets has progressed rapidly, with operations commencing at the Chunar GU and trial production at the Rewa clinker unit. It expects the acquired assets to achieve EBITDA break-even within the next few quarters, while EBITDA/t is likely to converge with the company’s average over the next 7-8 quarters.
* Our FY27/FY28 estimates now incorporate the JPA cement asset acquisition. We have raised our EBITDA estimates by ~3%/8% for FY27/FY28. We value the stock at 12x FY28E EV/EBITDA to arrive at our TP of INR2,250. BUY.
Volume rises ~9% YoY; realization/t declines ~1% YoY (up 6% QoQ)
* Consol. revenue/EBITDA/adj. PAT stood at INR38.9b/INR8.1b/INR3.2b (+7%/ -9%/-13% YoY and +4%/+10%/+51% vs. our estimates). Volume surged ~9% YoY to 7.6mt (in line). Realization declined ~1% YoY (+6% QoQ) to INR5,118/t (~3% above our estimates).
* Opex/t grew ~3% YoY, led by ~8%/4% YoY increase in other expenses/variable cost per ton. Freight cost/t remained flat YoY, while employee expenses/t declined ~1% YoY, benefiting from higher volumes. OPM contracted 3.6pp YoY to ~21%. EBITDA/t declined ~16% YoY to INR1,059. Depreciation/interest costs increased ~12%/36% YoY. Other income rose 2.8x YoY (led by MTM gains on treasury investments).
* Net debt surged to INR44.3b vs. INR14.3b as of Mar’26, driven by acquisition funding. Net debt-to-EBITDA stood at 1.47x, below its guidance of 2.0x.
Valuation and view
* DALBHARA’s 1QFY26 operating performance was above our estimates, led by better realization and strong volume growth. While near-term cost pressure remains due to external factors, internal cost-saving initiatives are expected to partially mitigate the impact. We believe the ramp-up of the acquired assets and their integration with the company’s standards remain key monitorables. Moreover, the timely completion of organic capacity expansion and improvement in capacity utilization remain the key catalysts for stock performance.
* Our FY27/FY28 estimates now incorporate the JPA cement asset acquisition. We estimate a CAGR of 14%/15% in revenue/EBITDA over FY26-28. PAT growth is estimated to be muted over FY26–28, primarily due to higher depreciation and interest costs associated with expansions. We estimate a volume CAGR of ~12% over FY26-28E and EBITDA/t of INR951/ INR1,058 in FY27/FY28E vs. INR1,015 in FY26. The company’s net debt is estimated to surge to INR60.5b in FY27, and net-debt-to-EBITDA ratio is estimated at 2.3x in FY27.
* At CMP, the stock is trading at 12x/10x FY27E/FY28E EV/EBITDA EV/t of USD71/USD68. We value the stock at 12x FY28E EV/EBITDA to arrive at our TP of INR2,250. Reiterate BUY
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