Dalmia Bharat’s Q1 Results: A Mixed Bag with Valuations Taking Center Stage
Dalmia Bharat Ltd., one of India’s leading cement companies, has reported its Q1 results, which have left investors with a mixed bag to digest.
Revenue Falls Short of Estimates
The company’s revenue for the quarter ended June 30, 2022, came in at ₹4,743 crore, which is below the estimated ₹5,100 crore. This decline in revenue was primarily due to lower-than-expected volume growth, which was offset by higher realization.
EBITDA and PAT in Line with Estimates
However, the company’s EBITDA and PAT came in line with estimates, which is a positive sign for investors. The EBITDA margin expanded by 130 basis points year-on-year to 24.1%, while the PAT margin expanded by 140 basis points year-on-year to 16.1%.
Cement Prices Improve in Key Operating Markets
One of the key highlights of the quarter was the improvement in cement prices in Dalmia Bharat’s key operating markets. The management expects these prices to hold, which is a positive sign for the company’s future growth prospects.
Southern Region Sees Sharpest Recovery
The southern region saw the sharpest recovery in cement prices during the quarter, with prices improving by 10% year-on-year. The eastern region, on the other hand, saw prices remaining stable after the Q4 hikes.
Company Aims to Reach 56 MTPA Capacity by FY27
Dalmia Bharat is also working towards increasing its installed capacity to 56 mtpa by FY27. This expansion plan is expected to drive growth for the company in the long term.
Renewable Energy Capacity Increases
The company has also commissioned 26 MW of renewable energy capacity under the Group Captive agreements, increasing its total operational renewable energy capacity to 294 MW. This is expected to improve the company’s operating efficiency and reduce its carbon footprint.
Valuations Take Center Stage
We have increased our target price for Dalmia Bharat to ₹2,485, valuing the company at 12x FY27E EV/EBITDA. However, we downgrade the stock to ‘Hold’ due to its expensive valuations.
We believe that the stock’s valuations are currently stretched, and investors may need to wait for a correction before re-entering the stock.
Conclusion
In conclusion, Dalmia Bharat’s Q1 results have left investors with a mixed bag to digest. While the company’s revenue fell short of estimates, its EBITDA and PAT came in line with estimates. The improvement in cement prices in key operating markets is a positive sign for the company’s future growth prospects.
However, the company’s valuations are currently expensive, and investors may need to wait for a correction before re-entering the stock.
