Buy Dalmia Bharat; target of Rs 3205: KR Choksey
KR Choksey recommended buy rating on Dalmia Bharat with a target price of Rs 3205 in its research report dated August 08, 2017.
KR Choksey's research report on Dalmia Bharat
Total sales stood at INR 23055 mn which was up by 14.1% Y-O-Y and down 5.2% Q-O-Q. Sales were in-line with our expectations of INR 23040 mn. Volumes stood at 3.99 MT as against our estimates of 4.1 MT and were up by 6.1% Y-O-Y. EBIDTA stood at INR 5566 mn which was up by 9.5% Y-O-Y and 0.9% Q-O-Q and EBIDTA margin declined to 27% as against 28.6% same quarter last year. EBITDA was in-line with our estimates of INR 5530 mn and EBITDA/ton surged to INR 1405 as against INR 1352 in Q1FY17. PAT stood at INR 1639 mn as against our estimates of INR 1610 mn and was up by 74.4% Y-O-Y and down 11% Q-O-Q while PAT Margin rose to 8% as against 5.3% in Q1FY17.
The company pared down debt to the tune of INR 3290 mn while its net debt stood at INR 46020 mn from INR 52410 mn on Q-O-Q basis and we believe that the financial de-leveraging should continue over FY18E-FY19E. With expected net debt of INR 28925 mn by FY19E, the company trades at an EV/EBITDA of 10.13x and EV/ton of $158. We value Dalmia Bharat Ltd at an EV/EBITDA of 12x FY19E on account of a.) financial de-leveraging, b.) outperforming volume growth, c.) robust market share of 8%/15%/21% in South/East/North-East and d.) superior operating efficiencies; arriving at a target price of INR 3205 translating into a 20.8% upside from CMP of INR 2653. We maintain our BUY rating on the stock.
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