Buy Dalmia Bharat; target of Rs 2800: Motilal Oswal

Motilal Oswal's research report on Dalmia Bharat

DALBHARA’s 3QFY24 EBITDA came in at INR7.75b vs. estimated INR7.4b and EBITDA/t stood at INR1,140 vs. estimated INR1,133. Adj. PAT (after MI) came in at INR2.7b (up 34% YoY) vs. estimated INR2.2b, driven by lower-thanestimated depreciation. Volume in core markets grew ~2% YoY (adjusted for 0.4mt sold through tolling arrangements with JPA in central India). It targets mid-teens volume growth in FY25. Cement prices remained weak in Jan’24. The management expects a CAGR of 1.5% in cement prices in the long term. It is confident of completing the acquisition of JPA cement assets in the next few months.

Outlook

We largely maintain our estimates for FY24-FY26. We have not yet factored in the JPA cement asset acquisition in our assumptions. The stock is currently trading at an attractive valuation of 11.5x/9x FY25E/FY26E EV/EBITDA. We reiterate our BUY rating with a TP of INR2,800.