We initiate coverage on Dalmia Bharat Limited (DBL) with a BUY recommendation and a Target Price of Rs 966, which implies an upside of 26% from the current levels.

DBL reported revenue de-growth of 22.2%YoY mainly impacted by volume declines (20%YoY) owing to lock-down restrictions on account of Covid-19. However, the volumes are better industry (de-growth of ~38%YoY). However, the company remains cautious about the demand outlook in the short-term due to current uncertain situation. We factor ~8%YoY decline in volumes in FY21 but strong double digit recovery in FY22E supported by capacity expansion/acquisitions and improvement in...

Emami: Emami posted a weak 1QFY21 as revenue/EBITDA declined by 26/8% YoY (HSIE -19/-9%). The domestic revenue decline of 26% YoY (volume decline of 28%) was due to the Navratna range, Male Grooming and Kesh King declining by 41/70/33% YoY. However, Boroplus, Healthcare, and Pain management clocked a strong growth of 28/23/15% YoY. The company saw sequential improvement in revenue growth (+8% YoY in June and double-digit growth in July), led by healthcare and pain management. The pick-up is driven by (1) healthy growth in rural markets, (2) new launches (5% contribution), and (3) channel filling. At the same time, sharp cost control (A&P down by 54% YoY) led to 487bps YoY expansion in EBITDA margin. Despite strong growth in June/July, we expect core categories to improve gradually. However, we increase our EPS estimate by 5/3/3% for FY21/FY22/FY23 on account of the strong traction in healthcare and pain management along with benign raw material prices. We value Emami at 18x P/E on Jun-22E EPS and derive a target price of Rs 232. Maintain REDUCE. JK Lakshmi Cement: JK Lakshmi Cement's (JKLC) standalone revenue/EBITDA/APAT fell 21/16/26% YoY to Rs 8.25/1.43/0.44bn respectively, due to lower sales. A healthy realisation and cost controls led to stable unitary EBITDA (+3% YoY to Rs 752/MT). We estimate demand recovery and benign input costs in subsequent quarters to drive 6% EBITDA CAGR during FY20-23E. JKLC expects to kick-start growth capex FY22E onwards in the northern market. We maintain estimates and BUY rating on the stock with a TP of Rs 385/share. Dalmia...

Outlook: We expect volume decline pace to subdue in subsequent quarters, leading to a 14% decline in FY21E. We estimate aggregate volume to rebound 19% YoY in FY22E. We estimate aggregate margin to remain flattish at ~21.5% during FY20-22E on lower input costs. Aided by higher regional utilisation, we expect regional pricing to remain buoyant in the north/central regions. We introduce FY23E estimates in this note and roll forward target valuations on Jun'22E. We maintain our recommendations for the coverage universe. Utilisation at multi-year low in 1QFY21: COVID lockdown-led sales loss in April and drag in May/June pulled down cement demand in 1QFY21E to a multi-year low. We estimate the aggregate volume of our coverage universe (11 companies) will decline 28/30% YoY/QoQ. Utilisation slumped to 52% (vs 76/75% YoY/QoQ). Sales fell ~40% YoY in south/ Maharashtra, ~20% in north/central/Gujarat. However, sales grew (5-10%) in the east, in our view. Trade sales fell at a much slower pace compared to non-trade sales.

15 June 2020 Dalmia Bharats (DBL) results highlight its market share gains with volume growth of 3% YoY in FY20, when industry volumes declined ~2% YoY. We expect this to continue, driven by ~30% capacity expansion in 18 months. We maintain our FY21/FY22E estimates and rating. The commissioning of new capacities and ongoing deleveraging should drive re-rating. Volumes declined 7.2% YoY to 5.17mt, in line with our estimate. Blended realization fell 5.9% YoY to INR4,803/t (+1.3% QoQ), 3% below our estimate of INR4,962/t. Total cost per ton (t) fell 3% YoY (in-line) to INR3,820/t (-0.6% QoQ), led by lower power and raw material costs. EBITDA per ton declined 16% YoY to INR983/t (+10% QoQ), 11% below our estimate of INR1,107/t due to miss on realization. EBITDA, thus, declined 22% YoY to INR5.1b (+11% QoQ), 10% below est.

The lockdown on account of COVID19 pandemic has impacted the industry volumes significantly due to lack of construction activities. April & May would be a wash out, and assuming gradual relaxation in lockdown and resumption of construction activities, we expect FY21E to end with ~10%-15% volume decline for the industry. However, we expect DBL's revenue to decline by ~8% for FY21E given recent acquisitions and historical outperformance to industry. DBL is adding ~7.7MT in East. Clinker capacity of 3.1MT and one...

We like Dalmia for its strong cost control (boosting margin despite weak pricing) and distribution (steady mkt share gain across south and east). Further, its balance sheet remains stable, even as it scales up capacity to become third largest in India. Thus, we value the co at a 20% premium to its 5-yr mean EV/EBITDA multiple of 10x. Maintain BUY with a TP of Rs 1,245 (12x Sep'21E EBITDA). We retain BUY on Dalmia Bharat with a TP of Rs 1,245 (12x Sep21 consol EBITDA, implying EV of USD 124/MT).