Dalmia Bharat share price rises over 3% in a weak market; Motilal Oswal sees a 23% upside
Around 10 am, Dalmia Bharat share price was up 2.12 per cent at ₹2,322.60 while the Sensex was 62 points down at 72,178.
In the last one year, Dalmia Bharat share price has gained about 23 per cent against an 18 per cent gain in the equity benchmark Sensex.
The stock hit its 52-week high of ₹2,428.85 on December 14, 2023, and a 52-week low of ₹1,675 on January 27, 2023.
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Brokerage firm Motilal Oswal Financial Services expects a further 23 per cent upside in the stock price from the current level.
The brokerage firm has a buy call on the stock with a target price of ₹2,800.
“Dalmia Bharat has underperformed the BSE Sensex and most cement stocks under our coverage in the last six months mainly due to a delay in the acquisition of JPA’s cement assets (announced in Dec’22) and a slowdown in cement demand in the eastern region, in our view,” Motilal Oswal pointed out.
“However, we are optimistic about the company’s long-term outlook, given (a) its plan to increase capacity to 110-130mtpa at a 14-17 per cent CAGR by 2031, (b) focus on sustainable growth through various initiatives such as higher blended cement, green energy mix, and (c) strong balance sheet with the target to maintain a net debt-to-EBITDA ratio of less than two times,” said the brokerage firm.
Motilal Oswal estimates a CAGR of 11 per cent, 24 per cent and 34 per cent in consolidated revenue, EBITDA, and PAT, respectively, over FY23-26, driven by higher sales volume, cost savings initiatives, and a lower tax rate.
“We estimate an nearly 11 per cent CAGR in consolidated volume over FY23-26. We estimate its EBITDA/t at ₹1,045, ₹1,150 and ₹1,250 in FY24, FY25, FY26, respectively, versus ₹900 in FY23 (average EBITDA/t of ₹1,150 over FY18-22). EBITDA margin is likely to increase to nearly 24 per cent in FY26 versus nearly 17 per cent in FY23 (average EBITDA margin of nearly 23 per cent over FY18-22),” Motilal Oswal said.
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The brokerage firm pointed out that under the Dalmia 2.0 initiative, the management has categorised priorities into four key areas: (1) growth, (2) financial performance, (3) sustaining trust, and (4) organisation building (this includes a focus on leadership development and digital transformation).
“With an expected improvement in earnings, its focus on capacity expansions without leveraging the balance sheet and the scale of operations (diversifying its presence), we expect the stock to trade at higher multiples,” Motilal Oswal said.
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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 01 Jan 2024, 10:26 AM IST
