HDFC Securities - Dalmia Bharat Results Review - Realisation uptick boosts profits!

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities and Mr. Saurabh Dugar, Institutional Research Analyst, HDFC Securities

Dalmia Bharat (DBEL) reported a strong 4QFY21 performance, led by robust volume growth and healthy pricing. Consolidated net sales/EBITDA/APAT grew 15/12/245% QoQ (32/53/2312% YoY) to INR 32.8/7.8/6.3bn respectively. FY21 performance also showed robustness despite COVID impacting 1HFY21 as net sales/EBITDA/APAT grew by 10/32/452% to INR 105.2/27.8/12.3bn respectively. We continue to like the company for its continued strong volume and margin performance. Despite major ongoing expansion, the balance sheet remains well under control. We maintain our estimates and BUY rating with an unchanged target price of INR 1,770 (12x Mar'23E consolidated EBITDA).

4QFY21 performance: DBEL's sales volume grew 11/24% QoQ/YoY to 6.42 mn MT. Utilisation, therefore, grew to 86% (80/79% QoQ/YoY). Mid-Feb hikes aided NSR firm-up by 4% QoQ, resulting in a 6% gain YoY. Opex inflated by 5/2% QoQ/YoY to INR 3,902/MT as rising input prices and diesel prices inflated costs. Unitary EBITDA rose 2/23% QoQ/YoY on strong realisations. Debt reduction (on back of investment liquidation) reduced interest cost further and tax reversal by DBEL's subsidiary DCBL resulted in a robust APAT growth by 2.5/24x QoQ/YoY.

FY21 performance: Sales volume grew by 7% YoY to 20.7 mnMT despite COVID impacting 1H. Utilisation stood flat at ~74%. NSR grew 2% YoY to INR 5,083/MT. In FY21, P&F/Other expenses fell by 10/8%, thereby reducing Opex by 3.5% YoY. Thus, unitary EBITDA rose 23% to INR 1,344/MT. EBITDA bumped up 32% and, coupled with lower depreciation and interest cost (debt reduction), this resulted in APAT growth of 4.5x. OCF grew 71% to INR 32bn, led by increased PBT and WC rationalisation. Capex for the year declined by 23% YoY to ~INR 10bn. FCF, therefore, jumped 3x to INR 22bn.

Other updates and outlook: DBEL started production from its new 2.25mn MT Bengal GU, and expects to start at Murli and Bihar GU by 2HFY22 and FY23. DBEL has delayed its Capex announcement due to COVID-2.0. It has sold off INR 2.78bn worth of MF units it got back custody of recently. It now has MF units worth INR 1.12bn on its books. DBEL has announced a dividend of INR 1.33/share. We like DBEL for its continued strong volume and margin performance. We maintain our estimates and BUY rating on the stock with an unchanged target price of INR 1,770 (12x Mar'23E consolidated EBITDA).

Shares of Dalmia Bharat Ltd was last trading in BSE at Rs.1551.75 as compared to the previous close of Rs. 1547.25. The total number of shares traded during the day was 6901 in over 986 trades.

The stock hit an intraday high of Rs. 1585 and intraday low of 1531.35. The net turnover during the day was Rs. 10736731.

Source : Equity Bulls

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