Dalmia Bharat Q4 Results Review - Robust Volume Growth; Lower Prices Impact Margin: Axis Securities

Axis Securities Report

During the quarter, Dalmia Bharat Ltd. reported a mixed set of numbers. Its Volume/Revenue grew by 19%/10%, which exceeded expectations, indicating robust demand.

However, Ebitda declined by 7%, falling below expectations. This decline can be attributed to better demand and lower costs, offset by lower realization.

Dalmia Bharat reported a profit of Rs 315 crore against our estimate of Rs 285 crore in Q4 FY24, driven by higher volume, lower costs, and higher other income. It recorded an Ebitda margin of 15.2% (versus. our estimates of 18.6%) against 18.1% YoY.

The quarter’s volume stood at 8.8 million tonnes per annum millions of tonnes per annum, up 19% YoY. Dalmia Bharat Ebitda/tonne stood at Rs 743, down sharply 22%/37% YoY/QoQ owing to lower realization, which contracted by 7%/8% YoY/QoQ. The company reported blended realization/tonne of Rs 4,894 against Rs 5,286 YoY.

Dalmia Bharat cost/tonne reduced by 4% YoY to Rs 4,151. This was driven by lower power and fuel costs, which declined by 24%/16% YoY/QoQ to Rs 898/tonne, the lowest in the last eleven quarters.

Outlook:

We expect cement demand to remain robust, driven by a continuous focus on infrastructure development. We anticipate the industry to grow at 1.2 times the gross domestic product growth, which is projected to be at 6.5%-7% for the next several years.

Given the company’s superior positioning in key markets of East and South, exposure to the West region, the government’s keen focus on infrastructure and low-cost affordable housing, increasing real estate demand, new capacity ramp-up along with the company’s cost optimization measures, we expect Dalmia Bharat to deliver stable performance going forward.

We expect the company to grow its Volume/Revenue/Ebitda/adjusted profit after tax at a compound annual growth rate of 10%/8%/13%/8% over FY23-FY26E. Pricing remains key monitorable.

Valuation and Recommendation

The stock is currently trading at 12 times and 10 times FY25E/FY26E enterprise /Ebitda and enterprise vaue/tonne of $90 and $85. We maintain our 'Buy' rating on the stock with a target price of Rs 2,050/share, implying an upside of 14% from the current market price.

Key Risks to our Estimates and target price

• Lower realization and demand in its key market and delay in capacity expansion.

• Higher input costs may impact margins.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.