Dalmia Bharat Q3 Results Review - JPA Acquisition Key For Pan India Aspiration: Yes Securities

Yes Securities Report

Dalmia Bharat Ltd.'s reported healthy revenue/Ebitda/profit after tax growth of plus 7/20/32% Y/Y on account of plus 8% YoY volume growth and 3% YoY eased total cost, while net sales realisation dipped marginally YoY in Q3 FY24.

Raw material/tonne surged by plus 57% YoY on account of rising fly ash and slag prices over demand supply mismatch. Despite that, the total cost/te decline by 4% YoY, mainly on account of eased power cost/tonne by 30% YoY in Q3 FY24. As a result, the Ebitda came in at Rs 1140/tonne (our estimate: Rs 1092/tonne) improved by plus 12% Y/Y translating the Ebitda margin to 21.5% in Q3 FY24.

With 0.9 million tonnes per annum of debottlenecking expansion at Belgaum, the Dalmia Bharat reached 44.6 mtpa in Q3 FY24 and will reach to 46.6 mtpa by FY24 end. Additionally, Dalmia Bharat will add another 2.9 mtpa in the east taking the total capacity to 49.5 mtpa (excluding JPA assets) by FY25E.

With JPA assets, Dalmia Bharat will make breakthrough in the central market, fulfilling its pan India aspiration of 110-130 mtpa. We believe the sustenance of cement prices (east/south) will be vital for Dalmia Bharat for better profitability and lower its dependence on borrowing as the ongoing Capex plus JPA acquisition will peak its net debt/ Ebitda greater then two times by FY24 end.

We trimmed our volume estimate by 9/3% for FY24/25E, on account of market share loss in the east during Q1 FY24. However, we believe double-digit organic volume growth of plus 10/18/12% Y/Y in FY24/25/26E owing to robust demand outlook and ramping up of incremental capacities.

We continue to like Dalmia Bharat for its stronghold in the East/South key markets, recent entry in west and pursuing entry into central India. The strong Infra push in the East/South will drive incremental volumes from newly added capacities and cost optimization measures to improve the efficiency.

We maintained our 'Buy' rating with a target price of Rs 2,933, valuing the stock at 15 times enterprise value/Ebitda on FY26E.

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