Dalmia Bharat - Strong performance; embarks on major expansion - HDFC Securities

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities

We maintain ADD rating on Dalmia Bharat (DBEL) with an unchanged target price of INR 2,210/share (13x Jun'23E consolidated EBITDA). In Q1FY22, its net sales/EBITDA fell 18/8% QoQ (up 36/14% YoY on a low base) to INR 25.9/7.0bn due to a sharp volume loss (mainly in the south). Robust pricing across markets, fuel mix optimisation, and continued productivity gains, however, moderated the impact of profits. DBEL outlined major Capex plans to increase its capacity by ~58% to 48mn MT by FY24E. It will also increase the share of low-cost green power to ~20% in FY24E vs 5% in FY21.

FY22Q1 performance: Sales volume fell 24% QoQ in Q1, hit by the extended lockdown in the south, while sales in the east were less impacted. NSR jumped 8% QoQ on robust pricing across all its markets. Opex rose 4% QoQ, mainly on op-lev loss due to lower utilisation (65% vs 86% QoQ) and rise in employee costs. Despite the rising slag and fuel prices, fuel mix optimisation and productivity gains kept opex inflation in check. Thus, unitary EBITDA bounced 20% QoQ to INR 1,431/MT. DBEL continued to repay its old debt (down 12% QoQ to INR 34bn), leading to lower interest expense.

Capacity to increase by 58% by FY24E: DBEL outlined 4.7/9.9mn MT clinker/cement expansion plans. Along with the ongoing expansion, these will increase DBEL's cement capacity by 58% to 48mn MT in FY24E. Its ongoing investments in WHRS/solar power will expand the share of green power to ~20% in FY24E vs ~5% in FY21. Thus, DBEL's total Capex spend will accelerate to ~INR 100bn during FY22-24E, leading to debt increase hereon. However, we expect its net debt/EBITDA to remain comfortable under 2x. We have increased our EBITDA estimates for FY22/23/24E by 6/10/4% respectively, factoring in higher sales outlook and cost savings. We have also built in Capex as per the company's plans in our estimates.

Shares of Dalmia Bharat Ltd was last trading in BSE at Rs. 2138.75 as compared to the previous close of Rs. 2134.4. The total number of shares traded during the day was 57207 in over 881 trades.

The stock hit an intraday high of Rs. 2167.75 and intraday low of 2130. The net turnover during the day was Rs. 122530168.

Source : Equity Bulls

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