MOSL: DALMIA BHARAT (Buy)-Strong beat led by realization improvement
​Dalmia Bharat: Strong beat led by realization improvement
(DBEL IN, Mkt Cap USD3.5b, CMP INR2638, TP INR3282, 24% Upside, Buy)
- Volume growth led by North East operations: Cement volume for 1QFY18 grew 6% YoY to 3.99mt (v/s our estimate of 4.04mt), as volume ex-OCL increased 8% YoY. Pure cement realization increased by INR402/t QoQ (INR585/t YoY) to INR5,126/t, led by better realization in both East and South markets as also higher proportion of premium sales. Revenue grew 16% YoY to INR20.59b (v/s our estimate of INR20.33b).
- Highest ever EBITDA/t despite cost pressures: EBITDA/t for 1QFY18 grew 15% QoQ (and 3% YoY) to INR1,395/t, as realization improvement more than offset the cost push. Unitary cost/t increased by INR175/t QoQ due to higher power and fuel charges, led by increase in petcoke prices. EBITDA increased 9%YoY to INR5.56b for 1QFY18. Interest cost declined just 12% YoY, as there were non-cash charges of INR300m pertaining to hedging cost in 1QFY18. PAT grew 55% YoY to INR1.45b, as tax rate was lower at 31% in 1QFY18 v/s 43% in 1QFY17.
- Concall highlights: (a) Interest cost was higher by INR300m due to non-cash charges related to hedging cost; (b) Net debt reduced by INR6.4b QoQ, led by receipt of INR5.25b from KKR stake sale; (c) Petcoke consumption was 75% v/s 78% in 4QFY17.
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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