Dalmia Bharat Ltd. share price target

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...

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).