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AnandRathi
Dalmia Bharat (Buy)
CMP: ₹803.1
Target: ₹1,270
Key takeaways: a) Despite the general slowdown in demand, Dalmia reported 8 per cent y-o-y volume growth to 4.47 million tonnes. However, with the greatest price drops in the South and East (the company’s market) and an 18 per cent drop in the Others segment, realisation (blended) declined 1.6 per cent y-o-y to ₹5,002 a tonne. With management expecting demand to revive in H2 FY20, with fresh capacities coming up and prices in the East rising, we expect volume and revenue CAGRs of 9 per cent and 13 per cent, respectively, over FY19-21 of respectively 9 per cent and 13 per cent.
The fall in commodity prices and the company’s cost-optimisation measures led to it reporting EBITDA/ton (blended) of ₹1,063, up 12.5 per cent y-o-y (and of cement, ₹1,058, up 17 per cent y-o-y). Management further talked of a ₹50-80/tonne reduction in variable costs, aided by declining petcoke prices/use of alternative fuel, etc. We expect a ₹1,216 EBITDA/tonne by FY22.
The company’s expansions in the East are on track, capex for which is expected at ₹1,400 crore in FY21 and ₹1,200 crore in FY22. Management expects Murli to revive by H1 FY21. Risks: Rising prices of pet-coke and diesel.
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