HDFC Securities is bullish on Dalmia Bharat has recommended buy rating on the stock with a target price of Rs 1450 in its research report dated May 14, 2019.
HDFC Securities' research report on Dalmia Bharat
During 4QFY19, Dalmia delivered earnings recovery, as consolidated net sales /EBITDA/PAT grew by 7/5/46% YoY to Rs 28/6.1/1.9bn respectively, after posting decline in the preceding three quarters. Sales volume rose 8% YoY (+25% QoQ) to 5.6mn MT, led by strong growth in south and NE regions, while high utilization at its eastern plants slowed the growth. Overall utilization rose to 89% vs 83/72% YoY/QoQ. Blended NSR increased 4% QoQ. Strong QoQ price recovery in the south markets (40% of total sales), amid marginally weak pricing in east/NE region drove ~200bps NSR gain. Additionally, both incentives and non-cement revenue increased QoQ which added ~200bps to the NSR increase. Opex fell 1% QoQ, benefitting from decline in energy prices, operating leverage gains and rising cost controls. On YoY basis, the cost controls offset energy inflation impact.
We recommend BUY on Dalmia Bharat with a TP of Rs 1,450 (12x FY21 consolidated EBITDA). In 4QFY19, Dalmia sustained its superior margin (EBITDA at Rs 1,092/MT, despite high energy costs and lower incentives YoY). The co also continued to pare off debt, despite large capex.
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