Broker's call: Dalmia Bharat (Buy)

CMP: ₹994.65

Target: ₹1,378

Despite flat y-o-y volume growth (up only 0.9 per cent) to 4.55 million tonnes, revenue rose 7 per cent y-o-y to ₹2,500 crore supported by healthy, 6.2 per cent, (blended) realisation growth to ₹5,576/tonne. Hit by the general elections, cement demand grew only 1.2 per cent y-o-y. With management talking of 6 per cent industry growth, we expect 13 per cent and 9 per cent CAGRs over FY19-21 in revenue and volumes respectively, backed by the ramping-up of capacity, incentives and the refractory division’s improving performance.

Business outlook and valuation: The company’s East expansions are on track. With its resolution plan being approved by NCLT, management expects Murli to revive by H1 FY21. It said capex would be from internal accruals, and ₹1,000 crore debt would be repaid in FY20. In Q1, ₹400 crore debt was repaid, leading to net debt/EBITDA of 1.6x. Prices in the South fell ₹5-15 in July; in the East, ₹10-15.

We expect a 37 per cent CAGR over FY19-21 in PAT. We retain a Buy, with a higher target of ₹1,378, reflecting EV/tonne of $122.

Risks: Rising prices of pet-coke and diesel.