Axis Securities

Target: ₹1,635

CMP: ₹1260.40

Dalmia Bharat Cement (DBCL), a wholly-owned subsidiary of Dalmia Bharat (DBL), added 5.15 MTPA of grinding capacity during the year. The company doubled its renewable power capacity to 63 MW in FY22 from 32 MW in FY21. It added 32 MW of thermal power through the acquisition of Murli Industries Ltd.

The company expended ₹1,988 crore on capex in FY22. It lowered its gross debt to ₹3,140 crore in FY22 through pre-payments and repayments of various term loans, non-convertible debentures, short-term loans, and buyer’s credit. DBL aims to expand its total cement grinding capacity from the current 35.9 MTPA to 48.5 MTPA by FY24.

Its expansion plans are progressing well. Moreover, it is confident of better demand momentum in FY23. However, current high energy prices are posing challenges and we expect the cost to remain elevated in H1-FY23, which would moderate only gradually in H2-FY23. Since a majority of the capacities are being added in the Eastern region, pricing as well as sustenance of demand remain key monitorables.

With attributes such as the company’s superior positioning in the key markets of East and South India, new capacity ramp-up along with its cost optimisation measures coupled with the government’s focus on infrastructure and low-cost affordable housing and increasing real estate demand, we expect DBL to improve its market share and deliver decent performance, going forward.

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