Reported Strong Volume Growth Of 13% YoY, Buy This Mid Cap Cement Stock, Shares Can Surge 24%

Stock Outlook & Returns of Investments

The stock last traded at Rs 1,742.50 per share on NSE. It gained 5.37% on Friday as compared to its previous close of Rs 1,653.70 per share. The 52 week high of the stock was recorded on 10 November 2021 at Rs 2,199 per share and the 52 week low was recorded on 20 June 2022 at Rs 1,212.50 per share. The stock is currently trading near its 52-week high.

The stock in the past 1 week has surged by 13.7%. It has given 9.18% in the past 1 month and 11.57% in the past 3 months, respectively. Over the 1 year, the stock has fallen, giving a negative return of 14.37%. Whereas, in the past 3 years, the stock gave a multibagger return of 114.4%. The stock was listed on the stock exchange on 22 Jan 2019, since its listing it has given 54.2% positive returns on investments.

Q2FY23 performance

Strong volume growth of 13% YoY (-7% QoQ) on capacity ramp-up. Utilisation stood at 63% vs 66/67% YoY/QoQ. NSR fell 3% QoQ (a seasonal price decline). Opex went up 16/2% YoY/ QoQ on higher unit input costs (up INR 100/MT QoQ: higher blending and fuel prices) and other expenses. Thus, unitary EBITDA contracted 30/46% QoQ/YoY to INR 656 per MT. While consolidated revenue went up 15% YoY on healthy volume growth, EBITDA/ APAT fell 39/74% YoY on sharp cost inflation.

H1FY23

Consolidated EBITDA fell 28% YoY to INR 9.7bn driving down OCF fall of 46% to INR 4.1bn. Capex continues to gain pace, up by 55% YoY in H1FY23 (up 16% vs H2FY22) to INR 11.6bn. Gross debt went up 6% (vs Mar22) to INR 34bn but remains comfortable.

Capex and outlook

DALBHARA spent INR 12bn in capex in H1FY23 and guided capex of INR 30bn/ INR 35-40bn for FY23/FY24E, towards expansion to 49mn MT by FY24E. It plans to reach a cement capacity of 70-75mn MT by FY27E. The company is also increasing its WHRS/solar power capacities to 72/101MW by Mar-23 vs 31/32MW in Mar-22. It further plans to add 155 MW of renewables in FY24, which will increase its green power share to 36%, vs 24% currently. DALBHARA is also increasing its blended cement sales. These should aid margin rebound and also reduce its carbon footprint (already the lowest specific CO2 emission rate in the Indian cement industry). The company has guided that its fuel cost will cool off 10% QoQ in Q3FY23. We maintain our FY23/24/25E EBITDA estimates.

Healthy volume offtake; cost pressure drags margin, buy for target price of Rs 2,145/share

"We maintain our BUY rating on Dalmia Bharat (DALBHARA), with an unchanged TP of INR 2,145/sh (13x its Sep-24E consolidated EBITDA). We continue to like DALBHARA for its robust volume and margin outlook along with balance sheet prudence. Dalmia reported healthy volume growth (+13% YoY). However, the margin contracted on the back of continued cost inflation and sub-par cost pass-through. Unitary EBITDA came in at INR 656 per MT (down 46/30% YoY/ QoQ). The rise in blending ratio and higher green power/fuel usage cushioned the cost inflation. The company has guided that fuel costs will cool off 10% QoQ in Q3," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.