YES Securities
Dalmia Bharat (Buy)
CMP: ₹1,074.4
Target: ₹1,465
Strong operational performance owing to improved pricing scenario in South during the quarter combined with lower energy and freight costs. EBITDA/tonne at ₹1,165 (+4.1 per cent y-o-y/+37.1 per cent q-o-q)
Eastern region has witnessed sharp price hikes in April 2019 with average prices moving up by about ₹30/bag month-on-month. Although, we estimate partial rollback going ahead, pricing scenario will remain sturdy as compared to FY19 levels in East. Accordingly, we reckon DBEL will be one of the biggest beneficiary and raise our EBITDA/tonne estimates by 11.4 per cent/15 per cent for FY20E/FY21E respectively.
We believe capex plan of company going ahead is prudent and estimate the entire capex plan (not factoring in Murli Industries) would be funded by internal accruals with steady net debt. Accordingly, we reckon net debt/EBITDA to further decline to 1.3x by FY21 as against 1.6x in FY19
We have valued DBEL at EV/EBITDA of 12x on FY21E, arriving at a target price of ₹1,465/share (+31 per cent upside). We maintain our ‘buy’ rating.