On Monday, Citi reiterated its Buy rating on Dalmia Bharat Ltd (DALBHARA:IN), maintaining a price target of INR 2,150.00. Dalmia Bharat's first-quarter EBITDA rose approximately 9% year-on-year to around INR 6.7 billion, driven by a 6% increase in volumes and a 7% decrease in costs. These factors helped to mitigate the impact of a 6% drop in realizations year-on-year.
The EBITDA surpassed Citi's projections due to stable quarter-on-quarter realizations and reduced costs, reaching INR 905 per ton compared to INR 745 in the previous quarter and INR 875 in the same period last year.
Management at Dalmia Bharat has indicated that cement prices are currently under pressure and are expected to remain subdued throughout the monsoon season.
They have projected approximately 12% volume growth in the fiscal year 2025, which would be 1.5 times the industry growth rate. However, there is some uncertainty surrounding tolling volumes, as the growth excluding these volumes was about 3% in the first quarter.
Dalmia Bharat has postponed its 75 million ton capacity target from the fiscal year 2027 to 2028. This delay comes as the National Company Law Tribunal (NCLT) has accepted the lenders' plea for insolvency against certain assets of Jaypee Associates (JPA). In light of these developments, Citi has opened a 90-day downside short-term view on Dalmia Bharat Ltd.
Despite this short-term view, Citi has reiterated its Buy rating based on the company's valuation, with an enterprise value per ton of $85, which aligns with the replacement cost.
Citi also cites potential cost benefits from green energy initiatives and efficiencies, as well as opportunistic price increases after the monsoon season, as reasons for maintaining the current target price of INR 2,150, which remains unchanged from previous assessments.
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