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Lower cost leads to EBITDA beat

* Dalmia Bharat’s (DALBHARA) 1QFY26 EBITDA grew ~32% YoY to INR8.8b and was ~9% above our estimates, led by lower-than-estimated opex/t (~3% below estimates). Sales volume declined ~5% YoY to 7.0mt (-3% vs. our estimates; however, adjusted for the JPA volume of 0.4mt in the base, sales volume remained flat YoY). Realization increased ~6%/9% YoY/QoQ (in line). OPM expanded 5.8pp/4.9pp YoY/QoQ at ~24% (+2.5pp vs our estimate), and EBITDA/t stood at INR1,261 (up 40% YoY; 12% above our estimates). Adjusted profit (adjusted for reversal of provisions) was up ~66% YoY to INR3.7b (+15% vs. estimates).

* The company announced a new capacity expansion plan of 3.6mtpa (clinker) and 6.0mtpa (grinding) at its existing Kadapa plant in Andhra Pradesh, with an estimated capex of INR32.9b. The project is likely to be commissioned by 2QFY28. This expansion will enable the company to tap into underserved markets of Northern Tamil Nadu, while further strengthening its presence in Andhra Pradesh and Southern Karnataka.

* Additionally, the company commissioned 26MW of renewable energy under a group captive model, taking its total operational renewable energy (RE) capacity to 294MW. RE consumption stood at ~41% (including thirdparty purchases) vs. ~36% in 4QFY25. Its power capacity is expected to be increased to 576MW in FY26 from 294MW in Q1FY26.

EBITDA/t stands at INR1,261 (vs. estimate of INR1,126)

* Consolidated revenue/EBITDA/adj. PAT stood at INR36.4b/INR8.8b/INR3.7b (flat/+32%/+66% YoY and -3%/+9%/+15% vs our estimates) in 1QFY26. Sales volumes declined 5% YoY to 7.0mt (however, adjusted for the JPA volume, sales volume remained flat YoY). Realization increased ~6%/9% YoY/QoQ to INR5,194/t.

* Opex/t declined 1% YoY (-3% vs estimates), led by ~7% reduction in variable costs/t (~10% below estimate). Other expenses/Staff cost/Freight cost per ton increased ~7%/5%/1% YoY. OPM expanded 5.8pp YoY to ~24% and EBITDA/t increased 40% YoY to INR1,261. Depreciation/interest cost increased ~2%/14% YoY, whereas other income declined ~2% YoY.

* The company divested 4.1% stake in IEX for INR7.4b, bringing its holding in IEX down to 10.8%. The company’s net debt (including investment in IEX of INR18.6b vs. INR23.4b as of Mar’25) increased to INR8.7b from INR7.2b as of Mar’25. The net debt-to-EBITDA ratio stood at 0.33x vs. 0.30x as of Mar’25.

Valuation and view

* DALBHARA reported strong operating performance, driven by improved realizations and lower variable costs, although volumes were marginally lower than our estimates. The company announced another capacity expansion in the southern region to strengthen its footprint in its core region. Additionally, the company liquidated a portion of its IEX investment (non-core assets), strengthening its balance sheet to support future growth plans.

* We have a BUY rating on the stock; however, we would review our assumptions after the concall on 23rd Jul’25 at 10:00 IST (Link to the call).

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