Buy Dalmia Bharat; target of Rs 785: ICICI Securities

ICICI Securities research report on Dalmia Bharat

Dalmia Bharat’s (DALBHARA) Q4FY20 EBITDA declined 16% YoY to Rs5.1bn (in line with consensus) owing to weak realisation. Volumes declined 7% YoY while realisation declined 5% YoY, both broadly in-line with our estimates. Company started trial run at 3mnte clinker line at Odisha which would reduce dependence on external clinker purchase; while grinding units are delayed by six months owing to Covid-19. Net debt declined by Rs3.1bn YoY to Rs28.3bn as at Mar’20 while the company bought back 5.3mn shares amounting to Rs2.7bn (vs Rs5bn earmarked at maximum price of Rs700/sh) during YTD-Q1FY21. We broadly maintain our FY21E-FY22E EBITDA with the target price unchanged at Rs785/sh based on 7x FY22E EV/E.

Outlook

Maintain BUY as market mix concerns (East exposure) seem adequately priced-in with valuation at 5.3x FY22E EV/E or 8xFY22E EV/OCF.

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