Dalmia Bharat - Highest-ever EBITDA/te in a tough quarter - ICICI Securities

Dalmia Bharat's (DALBHARA) Q1FY21 EBITDA at Rs6.1bn (down only 8% YoY) was significantly higher than our/ consensus estimates. This was led by 14.3% QoQ increase in realisation and strict cost control (cost/te declined 5% YoY). EBITDA/te increased 17% YoY to highest-ever of Rs1,675/te (I-Sec: Rs1,280/te). Commissioning of 4.5mnte grinding units in East (out of planned 7.8mnte) has been delayed due to Covid-19 and is now expected by Dec'20. Net debt declined Rs7.3bn QoQ (including MTM gain of Rs3.1bn on IEX investments) to Rs21bn as of Jun-20 end. Factoring Q1FY21 beat and better cost control, we increase our FY21E-FY22E EBITDA by 13-16%. With improving profitability and return ratios, we raise our target EV/E multiple to 8x (earlier 7x) and increase our target price to Rs1,100/share (earlier: Rs785) based on 8x FY22E EV/E. Maintain BUY.

- Revenue declined 19% YoY to Rs19.7bn (I-Sec: Rs18.7bn): Volume decline was lower at 19% YoY to 3.66mnte (I-Sec: 3.59mnte) owing to pick-up in demand from pending infra projects and IHB segments, especially in East India post Apr'20. Realisation sharply increased 14.3% QoQ /1.8% YoY (I-Sec: +9.4% QoQ) to Rs5,189/te on favourable pricing environment in most of its operating markets especially in South region. With the onset of monsoon, management expects prices to see seasonal weakness in the next few months.

- EBITDA/te increased 17% YoY to Rs1,675/te: Total cost/te declined 5% YoY / 3% QoQ vs our estimate of ~1% YoY increase in Q1FY21. Raw material plus power & fuel cost/te declined 5% YoY and QoQ due to stoppage of external clinker purchase post commissioning of 3.1mnte clinker unit at Rajgangpur, Odisha, 11% YoY decline in slag prices, and 20% YoY decline in petcoke prices owing to use of low cost inventory. However, it was partly offset by 4% YoY increase in fly ash prices. Freight cost/te declined 6% YoY/ 3% QoQ with lead distance remaining at <300km. Other expenses declined sharply 34% YoY (Rs138/te) to Rs2.3bn owing to strict control over expenses like advertising, travel, administration etc. Depreciation declined 12% YoY/ 20% QoQ to Rs3bn, while interest declined 37% YoY/ 41% QoQ to Rs730mn. Accordingly, PAT increased 23% YoY to Rs1.9bn (I-Sec: Rs361mn).

- Management expects 4.5mnte GUs (out of planned 7.8mnte) to be operational by Dec'20. DALBHARA received NCLAT approval under IBC proceedings to acquire the 3mnte Murli Industries, Maharashtra. The necessary actions to make resolution plan effective are in process and are likely to complete shortly. DALBHARA bought back 6.2mn shares amounting to Rs3.3bn (vs Rs5bn earmarked at maximum price of Rs700/share) till YTD-FY21. We model 9% volume CAGR over FY20-FY22E and expect EBITDA/te to increase from Rs1,092/te in FY20 to Rs1,248/te by FY22E.

Shares of Dalmia Bharat Ltd was last trading in BSE at Rs.767 as compared to the previous close of Rs. 787.95. The total number of shares traded during the day was 17543 in over 1899 trades.

The stock hit an intraday high of Rs. 824.55 and intraday low of 756. The net turnover during the day was Rs. 13824000.

Source : Equity Bulls

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