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Big miss in PAT from street expectations

Dalmia Bharat announced its Q3FY25 result yesterday, significantly falling short of market expectations.

*Q3FY25 consolidated revenues at INR31,810mn, (vs CEBPL est. INR33,602mn), down 11.6% YoY and up 3.0% QoQ. Total volume for Q3 stood at 6.7mnt, down 1.5% YoY and remained flattish QoQ.

*Consolidated EBITDA for Q3FY25 was reported at INR5,110mn, (vs CEBPL est. INR5,577mn), down 34.1% YoY and up 17.7% QoQ. EBITDA/t for Q3 came at INR763/t, (vs CEBPL est. INR780/t), down 33.3% YoY and up 17.7% QoQ.

*PAT for Q3FY25 reported at INR610mn, (vs CEBPL est. INR1,433mn), down 76.8% YoY and up 32.6% QoQ. EPS for Q3FY25 is INR3.3.

Maintains cost reduction guidance of 150-200/t: The management maintained cost savings guidance of INR 150-200/t by FY27, through logistics optimization (~INR 50/t) and increased reliance on captive coal. It also plans to transition to 100% blended cement by FY26 and 100% renewable power by 2050.

Delays capacity expansion plan: Dalmia Bharat's current cement capacity of 46.6 MTPA is set to increase to 49.5 MTPA by FY25. Post this, the company plans to expand its capacity to 75 MTPA by FY28, though this timeline has already faced delays. The management intends to release a detailed expansion roadmap by July 2025. However, the delay in capacity expansion poses a risk of market share loss, which could hinder the company's goal of establishing itself as a Pan-India player.

View and Valuation: We revise our FY25/26/27 EPS estimates by - 26.6%/-6.2%/-2.7 factoring in lower cement demand and maintain the rating to ‘HOLD’ with a revised TP of INR1,709, valuing it at 12x on FY27 EBITDA. The management anticipates the cement industry to grow by 6- 7% in Q4, with cement prices showing an upward trend. The INR 15 hike implemented in Dec-24 has been absorbed by the market, and further price increases are expected

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