Buy Dalmia Bharat; target of Rs 2660: Motilal Oswal

Motilal Oswal's research report on Dalmia Bharat

Dalmia Bharat’s (DALBHARA) 1QFY26 EBITDA grew ~32% YoY to INR8.8b (9% beat, led by lower-than-estimated opex/t). EBITDA/t increased 40% YoY to INR1,261 (~12% above our estimate), and OPM expanded 5.8pp/4.9pp YoY/ QoQ to ~24% (vs. est. ~22%). Adjusted profit (adjusted for reversal of provisions) surged ~66% YoY to INR3.7b (~15% above our estimates). Management indicated cement demand growth of ~6-7% YoY in FY26, led by increased government spending and a recovery in the housing sector, despite a soft start to 1Q. Cement prices in its core markets have seen a healthy recovery and held steady despite the monsoon season. The company believes prices will hold well at these levels in the near term. Management also laid out its (clinker-backed) capacity expansion plan of 14.0-14.5mtpa across the South and Northeast markets to increase its grinding capacity to ~64mtpa by FY28 from 49.5mtpa currently. DALBHARA reiterated its aspiration to become a pan-India player in the medium to longer term.

Outlook

We estimate a revenue/EBITDA/PAT CAGR of 10%/22%/31% over FY25-28. We also estimate a volume CAGR of ~7% over FY25-28 and an EBITDA/t of INR1,130/ INR1,170/INR1,210 in FY26/FY27/FY28E vs. INR820 in FY25E (avg. EBITDA/t of INR1,070 over FY20-24). At CMP, the stock is trading attractively at 12x/11x FY26E/FY27E EV/EBITDA and USD101/USD91 EV/t. We value DALBHARA at 13x Jun’27E EV/EBITDA to arrive at our TP of INR2,660. Reiterate BUY.