Dalmia Bharat Ltd.'s June-quarter earnings prompted brokerages to maintain their positive stance on the cement maker despite a decline in profitability, with analysts pointing to volume growth, capacity expansion and valuation as key reasons for remaining constructive on the stock. While Goldman Sachs, Citi and Macquarie trimmed or maintained their target prices after factoring in higher energy costs and lower realisations, all retained their positive recommendations on the company.
Brokerages said the June quarter reflected a mixed operating environment for cement producers as higher fuel costs and softer pricing weighed on margins despite healthy demand. Analysts highlighted Dalmia Bharat's volume growth, ongoing capacity expansion and focus on cost efficiencies as factors that could support earnings over the medium term. Several also noted that the company's geographic diversification and acquisition-led expansion should improve growth visibility relative to peers.
The company reported higher revenue during the quarter, but earnings declined as operating margins narrowed from a year earlier. Other income increased sharply, partially offsetting weaker operating performance, while one-time costs weighed on reported profit. Separately, Dalmia Bharat appointed Yatin Malhotra as chief financial officer with effect from Aug. 1.
Dalmia Bharat Q1 Highlights (Consolidated, YoY)
- Revenue increased 7% to Rs. 3,890 crore from Rs. 3,636 crore.
- EBITDA declined 8.8% to Rs. 805 crore from Rs. 883 crore.
- EBITDA margin narrowed to 20.7% from 24.3%.
- Net profit fell 52% to Rs. 188 crore from Rs. 393 crore.
- Other income rose to Rs. 139 crore from Rs. 49 crore.
- The company reported a one-time cost of Rs. 182 crore compared with a one-time profit of Rs. 16 crore a year earlier.
- Yatin Malhotra was appointed chief financial officer effective Aug. 1.
Despite margin pressure during the quarter, brokerages expect Dalmia Bharat's strategy of expanding capacity across regions to support volume-led growth over the next few years. Analysts also believe the company's increasing presence beyond its traditional markets should reduce dependence on individual regions and improve earnings resilience.
Brokerages said the company continues to focus on premium products, operational efficiencies and disciplined cost management to offset inflation in fuel and raw material costs. They also expect recently acquired assets and ongoing expansion projects to contribute meaningfully to volumes over the coming quarters.
Energy costs remain a key near-term risk, with petcoke prices having risen sharply before moderating towards the end of the quarter. While analysts expect costs to remain elevated in the September quarter, they believe better inventory management and efficiency measures could limit the impact on profitability. Industry capacity additions over the next few years are also expected to keep pricing pressure contained in some regions, although demand is likely to remain supportive.
Here's what brokerages are saying after Dalmia Bharat announced Q1 results:
Goldman Sachs
- Maintained 'Buy'; Target Price Cut To Rs. 1,980 From Rs. 2,020
- June-quarter volumes remained resilient despite regional headwinds.
- Profitability improved sequentially even as the operating environment remained challenging.
- The company remains on track to strengthen its pan-India footprint.
- Growth visibility over the next two years is viewed as better than several peers.
- Shares continue to trade at a discount to peers, offering favourable risk-reward.
- Target price was reduced to reflect updated earnings assumptions while maintaining a positive long-term outlook.
- Maintained Buy.
Citi
- Maintained 'Buy'; Target Price Cut To Rs. 2,150 From Rs. 2,450
- Revenue exceeded expectations, supported by higher volumes.
- Adjusted EBITDA declined from a year earlier because of lower realisations and higher costs.
- Cement volumes increased 9%, while realisations declined 2% and costs rose about 3%.
- EBITDA per tonne improved sequentially to about Rs. 1,060 due to better pricing compared with the previous quarter.
- Capacity expansion and premiumisation remain key drivers of future earnings.
- Volumes from the JPA acquisition are expected to contribute meaningfully from the third quarter.
- Inventory management helped offset part of the cost inflation during the quarter.
- Energy costs are expected to remain elevated in the September quarter.
- Current valuation offers an attractive entry point despite near-term earnings pressure.
Macquarie
- Maintained 'Outperform'; Target Price At Rs. 2,237
- Capacity expansion and regional diversification remain the company's key competitive strengths.
- Dalmia Bharat is expected to deliver volume growth ahead of peers through acquisitions and organic expansion.
- Analysts expect volume CAGR of more than 10% during FY26-FY28, supported by additional capacity.
- Net debt-to-EBITDA is projected to remain manageable despite expansion.
- FY27 and FY28 EBITDA estimates were reduced to account for higher energy costs and the impact of acquisitions.
- EBITDA is expected to grow at a double-digit pace over FY26-FY28 as new capacities become operational.
- Market share gains, stronger cement demand and higher prices remain key catalysts for a rerating.
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