Nalanda Securities bullish on Dalmia Bharat has recommended buy rating on the stock with a target price of Rs 2817 in its research report dated October 12, 2018.
Nalanda Securities' research report on Dalmia Bharat
Historically, the company expanded rapidly from 1.2mt in FY06 to 25mt in FY18. This was through a slew of organic and inorganic (OCL and Jaypee Bokaro in the East and Adhunik and Calcom in North East) acquisitions which helped it cement its position in South and East India through consistent gain of market share. Going forward, we expect this growth momentum to continue as it expands its presence in the East with a clinkerisation line in Rajgangpur (through its subsidiary, OCL India) and grinding units in Odisha, Bengal and Bihar aggregating to an additional capacity of 7.8mt. DBL is estimated to set it up at a cost of USD 70/t and it is expected to be completed in about 25 months.
At CMP of INR 2052/share, DBL trades at an EV/EBITDA of 7.9x on FY20E earnings and an EV/Ton of $101 on FY20E capacity. We value DBL’s present capacity of 25mt at EV/Ton of $150 (asset-based) and EV/EBITDA at 10x (earnings-based) to reach at an average target price of INR 2817/share, giving a potential upside of 37.3%.
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