Prabhudas Lilladher's research report on Dalmia Bharat
We initiate coverage on Dalmia Bharat (DALBHARA) with BUY rating, underpinned by strong earnings growth and compelling valuations post mutual fund fiasco. DALBHARA is India’s 4th largest cement producer with capacity of 29.6mnt, spread over East, South and West region. In South (40% volume share), more than 75% volumes come from profitable states of Tamil Nadu, Karnataka and Kerala while volatile and oversupply prone states of AP & Telangana constitute only 25% of volumes. In East (50% of volumes), the company enjoys logistics edge over peers with integrated operations in Odisha. Led by strong market positioning and competitive cost structure, DALBHARA’s margins rank in top quartile of the sector. To further consolidate its position in East region, company is expanding East plant’s capacity by 75% or 8mnt with its All-India capacity increasing by 27% to 37.5mnt. This would drive 13%/31% CAGR in EBITDA/PAT for FY20-FY23E.
Outlook
We value the stock at Rs1,480, EV/EBITDA of 9.0x FY23e (25% discount to pre-MF episode valuations of 12.0x).
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