Geojit Financial

Dalmia Bharat (Buy)

Target: ₹2,350

CMP: ₹2,148

We maintain our Buy rating with a revised Target of ₹2,350 (earlier ₹1,770) considering strong margins and improving demand outlook. Q1 FY22 revenue grew by 31 per cent y-o-y (-21 per cent q-o-q) aided by 34 per cent y-o-y growth in volumes (low base, -20 per cent y-o-y in Q1 FY21). EBITDA grew by 14 per cent y-o-y while EBITDA margin declined by 410 bps YoY (+340 bps q-o-q) to 27 per cent.

DBL has been on capacity expansion through organic and inorganic routes. Post completion of the ongoing expansion (8 tonne in East) and acquisition of 3 tonne (West), the total capacity would be at 38 tonne (12 tonne in FY14).

Now, DBL has announced additional capex plans to reach 48.5 tonne by FY24 with ₹5,000 crore capex and outlined a long-term plan to reach 110-130 tonne by 2031 while maintaining a strong balance sheet. Despite expansion, debt repayment was strong (₹2,224 crore in FY21 and ₹476 crore in Q1 FY22). Current net Debt/EBITDA is at 0.08x and D/E at 0.1x.

Barring near-term uncertainty, demand outlook is positive in the longterm, given India’s strong focus on infra and housing. Currently, DBL trades at 1Yr Fwd EV/EBITDA of 12.5x, we value at 12x FY23E EV/EBITDA

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