MOSL: DALMIA BHARAT (Buy)-Healthy realization offsets cost push
Dalmia Bharat: Healthy realization offsets cost push
(DBEL IN,Mkt Cap USD3.3b, CMP INR2550, TP INR3198, 25% Upside, Buy)
- Volume growth below estimate: Cement volume grew 13% YoY to 4.51mt (our estimate: 4.65mt), led by healthy growth in underlying markets. Blended realization grew 2.5% YoY (3.7% QoQ) to INR5,250/t, led by better pricing across focus markets and higher proportion of trade and premium sales. Revenue grew 16% YoY to INR23.7b (our estimate: INR24.3b).
- Sequential increase in EBITDA/t due to higher realization: EBITDA/t grew 2% QoQ (but declined 17% YoY) to INR1,162 in 1QFY19 due to higher realization, partially offset by sequential increase in cost/t as also higher EBITDA from refractory segment. Employee expenses/t increased 21% QoQ, while power and fuel cost/t increased 16% QoQ (8% YoY) due to higher petcoke prices. EBITDA declined 6% YoY to INR5.24b (our estimate: INR5.5b); margin was 22.1% (-5.1pp YoY, -0.3pp QoQ). Interest cost reduced 23% YoY to INR1.62b due to gross debt reduction of INR2.03b. Adjusted PAT declined 1% YoY to INR1.24b (our estimate: INR1.55b).
- Concall highlights: (a) Dalmia has paid INR1.5b towards acquisition of Kalyanpur Cement, with production expected to start from November 2018; (b) Awaiting NCLT clearance for Murli Industries acquisition; (c) 1QFY19 growth in underlying markets of East/North East/South at 13%/17%/16% YoY; (d) AFR proportion to increase from 4% to 8% by FY19 end.
Dalmia Bharat Limited is an India-based holding company. The Company operates as a cement manufacturing company. The Company's segments include Own Manufactured Cement, Refractory, Management Services and Others. The Company's brands include Dalmia DSP, Dalmia, Dalmia Ultra, Dalmia Super Roof, Vajram and Konark. The Company manufactures cement for use in lining of oil wells, airport strips and railway sleepers, among others. The Company owns a 5.5-megawatt capacity solar power plant at Medinipur, West Bengal. The Company also owns thermal power plants, co-generation plants and wind farms. The Company has manufacturing facilities in approximately 11 locations with an installed capacity of 25 million tons per annum. The Company's subsidiaries include Dalmia Power Limited, Adwetha Cement Holdings Limited, Kanika Investment Limited and Dalmia Cement (Bharat) Limited.
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