Dalmia Bharat’s Share Price Takes a Dip Despite Strong Q2 Results

Dalmia Bharat's Share Price Takes a Dip Despite Strong Q2 Results

VoM News Desk | October 17, 2023 | 04:07 PM IST | Breaking News | Follow on Google News

Dalmia Bharat’s Share Price Takes a Dip Despite Strong Q2 Results

Dalmia Bharat’s Share Price Takes a Dip Despite Strong Q2 Results

Dalmia Bharat’s stock price faced a setback, declining by over 4% in morning trade on the BSE, during the session on Tuesday, October 17. This decline came in the wake of the stock opening at ₹2,340.15, compared to the previous closing price of ₹2,322.25, and subsequently dropping by 4.10% to reach an intraday low of ₹2,227. As of 10:55 am, Dalmia Bharat’s share price was down by 3.97%, resting at ₹2,230.

Outperforming the Benchmark Indices

Dalmia Bharat’s shares had gained an impressive 48% over the last year, significantly outperforming the equity benchmark Sensex, which had risen by approximately 14% during the same period.

Despite Earnings Uptick, Dalmia Bharat Faces Headwinds

Interestingly, Dalmia Bharat’s share price faced a decline despite reporting robust Q2 results. In an exchange filing on October 14, Dalmia Bharat announced a 6.6% year-on-year (YoY) increase in its volume, reaching 6.2 million tonnes (MnT) in Q2FY24. Key financial figures revealed a 6% YoY rise in revenue to ₹3,149 crore, alongside a significant 46% YoY increase in EBITDA/tonne to ₹955. The net debt/EBITDA ratio stood at 0.59 times.

Strategies for Growth and Diversification

Mahendra Singhi, Managing Director and CEO of Dalmia Cement (Bharat) Limited, attributed the impressive performance to various factors, including reduced fuel costs, increased usage of renewable power, and improvements in key performance indicators, resulting in a remarkable 55% YoY improvement in EBITDA, amounting to ₹589 crore. Furthermore, cement capacity expanded to 43.7 MnT, while clinker capacity rose to 22.2 MnT during the review quarter. Dalmia Bharat declared an interim dividend of ₹4 per share.

Puneet Dalmia, Managing Director and CEO of Dalmia Bharat, expressed optimism about a long-term strong demand for cement in India as the country undergoes significant transformation. He highlighted the company’s forward-thinking approach, evidenced by the addition of nearly 17.2 MnT in cement capacity over the last 3.5 years, representing about 65% growth over the FY20 capacity. Dalmia Bharat aims to reach a capacity of 110-130 MnT by 2031 and is committed to capitalizing on the significant opportunities ahead.

Brokerages Maintain Positive Stance

In the face of the share price dip, numerous brokerage firms have retained their positive views on Dalmia Bharat, citing factors such as rising cement prices and volume improvements in the east and south regions. Among these, Jefferies upheld a buy rating with a revised target price of ₹2,680, reflecting positive outlook on cement prices and expected improvements in H2FY24.

Domestic brokerage firm Kotak Institutional Equities retained its ‘add’ view with an increased target price of ₹2,350, emphasizing the attractive risk-reward profile driven by capital allocation, growth visibility, and cost-effective valuations.

HDFC Securities continued its buy rating on Dalmia Bharat, maintaining a target price of ₹2,560, highlighting the company’s robust volume, margin, and balance sheet, as well as its expected rebound in unit EBITDA.

Nirmal Bang also maintained a buy rating, revising the target price to ₹2,908, recognizing Dalmia Bharat’s growth potential and competitive edge in the industry.

Potential Challenges

Despite the optimistic outlook, Dalmia Bharat may face headwinds related to price rollbacks, premiumization efforts, and intense competition in core markets.

VoM News Desk

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