Buy Dalmia Bharat; target of Rs 3420: JM Financial

JM Financial's research report on Dalmia Bharat

Dalmia Bharat (DBEL) reported revenue growth of 21% YoY in 4QFY18, led by volume growth (14% YoY) on rising demand in key markets - East (+17% YoY), Northeast (+14% YoY), South (+14% YoY) and Maharashtra (+14% YoY). Realisations declined marginally on a sequential basis and was 3% higher YoY. EBITDA/t at INR1,137/t declined 6% YoY as cost escalations more than offset the realisations improvement.

Outlook

DBEL is setting up the capacity at a cost of USD70/t, expected to be completed in 30 months. We value DBEL’s existing assets at 12x EVE additionally incorporating INR400 on expansion potential; TP is INR 3,420 (Mar’19). Maintain BUY.