MOSL: DALMIA BHARAT (Buy)-Healthy volume growth, realization drive profitability
Dalmia Bharat: Healthy volume growth, realization drive profitability
(dbel IN, Mkt Cap USD3.6b, CMP INR2736, TP INR3403, 24% Upside, Buy)
- Volumes in-line: Volumes grew 14% YoY to 5.18mt (in-line) in 4QFY18. Cement realization rose 3% YoY (-1% QoQ) to INR4,892/t, while blended realization increased 6% YoY (+1% QoQ) to INR5,093/t (est. of INR4,907), leading to a 21% YoY rise in net sales to INR26.4b (est. of INR25.4b).
- Sequential improvement in profitability: EBITDA/t rose 4% QoQ (-6% YoY) to INR1,137, led by better realization and lower P&F cost/t due to cost efficiencies. Hence, EBITDA rose 7% YoY (+30% QoQ) to INR5.9b (est. of INR5.1b), with the margin at 22.3% (-2.8pp YoY, +0.6pp QoQ). Interest cost declined 20% YoY to INR1.54b due to gross debt reduction by INR7.75b in FY18. Tax rate was at 33% in 4QFY18 (17% in 4QFY17). Adj. PAT, thus, increased 10% YoY to INR1.85b (est. of INR1.68b).
- Management commentary: 1) DBEL announced capacity expansion of 7.8mt in east at total capex of INR37b. 2) OCL merger to be completed by Sep’18.
- FY18 performance: Volumes increased 11% to 16.96mt. Blended realization increased 4.5% to INR5,076, resulting in net sales of INR86b (+16% YoY). EBITDA rose 8% YoY to INR20b, with EBITDA/t declining by INR35/t to INR1,204. Adj. PAT increased 110% YoY to INR5.35b due to lower interest cost and tax rate (32% v/s 43% in FY17).
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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