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MOSL: DALMIA BHARAT (Buy)-Volumes in-line-margins disappointment attributed to higher cost/t

Dalmia Bharat: Volumes in-line; margins disappointment attributed to higher cost/t

(DBEL IN, Mkt Cap USD2.6b, CMP INR2136, TP INR2875, 35% Upside, Buy)

 

• Volumes in-line: Cement volumes increased 14% YoY to 4.13mt (in-line), led by healthy growth in underlying markets. Blended realization increased 4% YoY (-0.5% QoQ) to INR5,225/t, led by pricing pressure across focus markets. Revenue grew 18% YoY to INR21.5b (our estimate: INR21.7b).
• Profitability impacted by cost push: EBITDA/t declined 19% QoQ (-22% YoY) to INR942 due to cost push. EBITDA declined 12% YoY to INR3.9b (our estimate: INR4.5b), with the margin shrinking 6pp YoY (-4pp QoQ) to 18%. Interest cost increased 14% YoY to INR2.3b due to MTM loss on forex loans. Consequently, PAT declined 89% YoY to INR20m (our estimate: INR731m).
• 1HFY19 performance: Volumes increased 13% YoY. Sales grew 17% YoY, while EBITDA/PAT declined 9%/39% YoY. For 2HFY19, we expect volumes to increase 13% YoY; sales/EBITDA/PAT are expected to grow 17%/12%/11%.
• Concall highlights: (a) Board approved implementation of the scheme of amalgamation of OCL India Limited and DBEL. Record date for determining the eligible shareholders of DBEL will be announced shortly. Listing of amalgamated entity is expected in early CY19. (b) DBEL spent INR3.5b on Kalyanpur acquisition in 1HFY19. (c) Gross debt stands at INR71b and net debt at ~INR38b.