Buy Dalmia Bharat; target of Rs 2094: Geojit Financial Services

Geojit Financial Services research report on Dalmia Bharat

DBL has signed a definitive agreement with Jaiprakash Associates for the acquisition of 9.4 MT of cement at an alluring EV of Rs. 56.5 billion (waiting for NoC from lenders). This will give access to the central region DBL is expanding its capacity to reach ~50MT (excluding JP acquisition) by FY25 and has a long-term goal to become a pan-India player with a capacity of 110MT by FY31, which will aid for future re-rating. Towards cost efficiency, DBL has expanded its renewable energy capacity to 185MW in FY24, and targets 350MW by FY25. The company has guided for a total capex of Rs.100bn during FY24-FY25 and net debt would peak at ~Rs.50bn by FY25 end with a D/E of 0.4x.Given the GoI's strong emphasis on housing & infrastructure, the demand outlook is favourable. We value DBL at 11x FY26E EV/EBITDA (2Yr Avg=12x).

Outlook

Dalmia Bharat Ltd. (DBL) is India’s fourth largest cement company, with a capacity of ~44MT; focusing on South (14.1MT), East & North-East (26.7MT)and West (2.9MT). We maintain our BUY rating with a revised target price of Rs. 2,094,considering the positive volume outlook and strong focus on expansion. Revenue grew by 10% YoY in Q4FY24, mainly driven by volume growth of 19%YoY. However, operating profit declined by 7.5%YoY due to drop in EBITDA margin (-290bps YoY to 15.2%) as realisation declined.

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