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Target: ₹2,800
CMP: ₹2,360.50
Dalmia Bharat has underperformed the BSE Sensex and most cement stocks under our coverage in the last six months (Exhibit 3) mainly due to a delay in the acquisition of JPA’s cement assets (announced in Dec’22) and a slowdown in cement demand in the eastern region, in our view.
However, we are optimistic about the company’s long-term outlook, given: its plan to increase capacity to 110-130mtpa at a 14-17 per cent CAGR by 2031; focus on sustainable growth through various initiatives such as higher blended cement, green energy mix; and strong balance sheet with the target to maintain a net debt-to-EBITDA ratio of less than 2x.
We estimate a CAGR of 11/24/34 per cent in consolidated revenue/EBITDA/PAT over FY23-26, driven by higher sales volume, cost savings initiatives, and a lower tax rate. We estimate an 11 per cent CAGR in consolidated volume over FY23-26.
Under the Dalmia 2.0 initiative, the management has categorised priorities into four key areas: Growth, Financial Performance, Sustaining Trust and Organisation Building (this includes focus on leadership development and digital transformation).
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