Dalmia Bharat - Targeting aggressive growth to double the size - ICICI Securities

Dalmia Bharat's (DALBHARA) Q3FY21 EBITDA at Rs6.9bn (up 51% YoY) was better than our/ consensus estimates owing to higher volumes/ realisation. Realisation decline was restricted to 2% QoQ (up 5% YoY), while still growing volumes by 14% YoY, led by strong demand growth in East region. The company is targeting pan-India presence and has aggressive growth plans to double its capacities (details yet to be unveiled) in the next 3-4 years. Accordingly, DALBHARA is likely to sustain industry-leading volume growth over the next few years. Net debt further declined by Rs6bn QoQ to Rs14bn as of Dec'20. Factoring in higher volumes, we increase our FY21-FY23 EBITDA by 2-3%, raise our target multiple to 8x (earlier 7x) on improving market share / profitability and increase our target price to Rs1,350/sh (earlier: Rs1,020) based on 8x FY23E EV/E (on half-yearly rollover). Maintain ADD. Key risk: Lower than expected demand/ pricing.

- Revenue increased 18% YoY to Rs28.6bn. Volume sharply increased 14% YoY to highest ever quarterly volumes of 5.8mnte (I-Sec: 5.66mnte) led by strong demand from rural segment and tier-II cities and uptick in infrastructure spending by government in East and South regions. Realisation decline was restricted to 2% QoQ (up 5.7% YoY) to Rs4,717/te. Trade sales stood at 65% (declined 300bps QoQ) with premium products growing 60% YoY to 18% of trade sales.

- EBITDA/te increased 33% YoY to Rs1,191/te (I-Sec: Rs1,126/te). Total cost/te declined 3% YoY (+5% QoQ) to Rs3,734/te. Raw material plus power & fuel cost/te declined 3% YoY owing to lower clinker cost post the recent commissioning of Rajgangpur line 3 from Oct'20; however, the same increased 9% QoQ due to increase in slag prices (+10% QoQ) and increase in petcoke prices by 12% YoY/ 18% QoQ, respectively. New clinker plant operated at 70% utilisation in Q3FY21 and is likely to provide cost savings of Rs70-75/te at clinker level. Freight cost/te increases 1% YoY/ 2% QoQ owing to increase in lead distance (~277kms), diesel prices and lower direct despatches. Other expenses grew 9% YoY owing to higher ad / marketing and maintenance / repair spends.

- DALBHARA targeting to become pan-India player and has aggressive growth plans to double capacities (details yet to be unveiled) in next 3-4 years. DALBHARA has increased capacity by 2mnte through debottlenecking (Bokaro- 1.1, BCW- 0.4, KCW- 0.4, Alsthom- 0.1) in Q3FY21 to 28.5mnte. 2.2mnte West Bengal and 2mnte Odisha grinding units are expected to become operational in Q4FY21 and Q1FY22, respectively. 3mnte Murli Industries (MIL) may commission by Sep'21; while 2.5mnte Bihar grinding unit is likely to commission in FY23. Capex for 9MFY21 stood at Rs11bn and the same can be Rs14bn in FY22 including Rs4bn for MIL. Net debt declined by Rs6bn QoQ to Rs14bn (including MTM gain of Rs1.2bn on IEX investments) as of Dec'20.

Shares of Dalmia Bharat Ltd was last trading in BSE at Rs.1333 as compared to the previous close of Rs. 1238.85. The total number of shares traded during the day was 23272 in over 1864 trades.

The stock hit an intraday high of Rs. 1340 and intraday low of 1260.3. The net turnover during the day was Rs. 30503212.

Source : Equity Bulls

Keywords