Buy Dalmia Bharat; target of Rs 2100: Motilal Oswal

Motilal Oswal's research report on Dalmia Bharat

Dalmia Bharat (DALBHARA)’s 3QFY25 EBITDA declined 34% YoY to INR5.1b (11% miss due to lower-than-estimated volume and higher variable cost/t). EBITDA/t was down 33% YoY to INR767 (est. INR800). OPM contracted 5.6pp YoY to ~16%. PAT declined 78% YoY to INR590m (60% below our estimates). Management indicated that cement demand recovery was below estimates due to slippages in government capex, unseasonal rains, and state elections. The company believes that the government’s focus on increasing capex will be crucial for strong growth moving forward. Cement prices rose in Dec’24 and have sustained so far. The company expects additional price hikes in 4QFY25. However, heightened competitive intensity may cap the potential for higher growth. The company’s focus remains on cost reduction (targeting cost savings of INR150-200/t through internal measures by FY27E).

Outlook

We believe the near-term challenges, including: 1) higher competitive intensity in its core markets; and 2) limited growth opportunities due to the delayed capacity expansion plan, will remain a key overhang on the stock price movement. The company is among the least-cost producers in the industry, backed by a higher blending ratio, green power share, and lower freight cost. At CMP, the stock is trading attractively at 11x/10x FY26E/FY27E EV/EBITDA and USD82/USD80 EV/t. We value DALBHARA at 12x Dec’26E EV/EBITDA to arrive at our revised TP of INR2,100 (vs. earlier TP of INR2,250). Reiterate BUY.