MOSL: DALMIA BHARAT (Buy)-Volumes beat-EBITDA below estimate due to higher other expenses
Dalmia Bharat: Volumes beat; EBITDA below estimate due to higher other expenses
(DBEL IN, Mkt Cap USD3.7b, CMP INR2795, TP INR3328, 19% Upside, Buy)
- Volume growth above estimate: Cement volumes grew 17% YoY to 4.15mt (est. of 3.88mt) in 3QFY18. Pure cement realization increased 5% YoY to INR4,941/t (flat QoQ), led by better pricing in the eastern markets. Revenue, thus, increased 21% YoY to INR20.9b (est. of INR19.4b).
- Sequential decline in EBITDA/t due to higher other expenses and RM cost: EBITDA/t declined 10% QoQ (-6% YoY) to INR1,095 in 3QFY18 due to higher other expenses and raw material costs (an increase in slag prices by 62% YoY). Hence, EBITDA rose 10% YoY to INR4.5b (est. of INR 4.7b), with the margin at 21.7% (-2.3pp YoY, -2.3pp QoQ). Interest cost was lower by 33% YoY at INR1.42b due to a reversal of forex fluctuations and debt reduction by INR2.28b/INR7.37b in 3QFY18/9MFY18. Other income declined 25% YoY due to lower yield. With the tax rate at 32% (33% in 3QFY17), adj. PAT increased 145% YoY to INR979m (est. of INR1.14b).
- Concall highlights: (a) Company announced the acquisition of Kalyanpur Cement, Bihar (cement capacity of 1.1mt) and Murli Industries, Maharashtra (capacity of 3mt), subject to NCLT approval. (b) Freight cost remained flat YoY, despite an increase in diesel prices due to GST and a reduction in lead distance by ~20km.
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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