BUY on Dalmia Bharat - Stellar show - HDFC Securities

Ms. Rajesh Ravi, Institutional Research Analyst, HDFC Securities.

Dalmia Bharat's consolidated revenue fell 19% YoY to Rs 19.74bn on COVID-led sales decline (still gained market share). Robust pricing and strong cost control, however, moderated EBITDA fall to 8% at Rs 6.14bn. Despite lower EBITDA, APAT rose 30% to Rs 1.90bn on lower capital charges and higher other income. We remain bullish on Dalmia for its robust distribution and cost controls, and healthy balance sheet despite ongoing expansions. We maintain BUY with a revised target price of Rs 1,005.

1QFY21: Sales volume fell 20/29% YoY to 3.7mn MT, hit by sharp demand decline in April. Its sales decline was lower versus its peers, leading to market share gains in east and south. Strong price recovery in south markets drove 12% QoQ NSR rise to Rs 5,393/MT (flat YoY). On the cost front, input costs fell due to lower pet coke prices and in absence of external clinker purchase. Freight costs also reduced on increased efficiency. Strong fixed cost controls moderated the impact of lower sales. Thus, unitary EBITDA buoyed 15% YoY to Rs 1,678/MT, cushioning EBITDA decline. Lower interest cost (on reduced interest rate), increased other income (treasury gains) and lower depreciation drove up APAT despite EBITDA decline. In 1Q, Dalmia lowered its gross/net debt by ~Rs5/4bn respectively with no capex outgo. It also bought back shares worth Rs 3.0bn in 1Q.

Outlook: Dalmia expects to continue its market share gains owing to its strong distribution. Upcoming clinker and GUs in east will bolster volume recovery in 2HFY21E onwards. Thus, we model in 8% volume decline in FY21E and 25% rebound in FY22E. We upgrade FY21E consolidated EBITDA estimate by 9% on lower cost assumptions. We estimate 5% EBITDA CAGR during FY20-23E. We maintain BUY rating on the stock with a revised target price of Rs 1,005/share (10x Jun'22E consolidated EBITDA).

Shares of Dalmia Bharat Ltd was last trading in BSE at Rs.772.25 as compared to the previous close of Rs. 779.65. The total number of shares traded during the day was 2672 in over 563 trades.

The stock hit an intraday high of Rs. 794.3 and intraday low of 772. The net turnover during the day was Rs. 2088797.

Source : Equity Bulls

Keywords