Amid multiple triggers, including attractive valuations and easing headwinds, several brokerages are bullish on this mid-cap cement firm – Dalmia Bharat Cement, a dominant player in the eastern part of the country and sees a potential growth of up to 70 per cent in the share on a long-term basis. 

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According to ICICI Direct Research, the cement industry is to end the FY22 with sales volume growth of 9 per cent while cost inflation remains a key near-term concern for the sector. The industry would witness a marginal impact of fuel cost inflation, due to which pressure on margins is likely, it added. 

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Shares of Dalmia Bharat Cement closed over 3 per cent lower, succumbing to the overall market’s fall, to Rs 1550.05 per share on the BSE as against a 1.2 per cent decline in the S&P BSE Sensex. 

YES Securities 

For the long run, YES Securities believe the cement industry, including Dalmia Bharat is on a strong footing given the healthy NSR (net service revenue) and better demand aided by the government’s infrastructure impetus and fading covid‐19 disruption along with potential cost stabilization. 

Given the cement companies already struggling to pass on the inflated cost across the supply chain amid the muted demand of the last two quarters, taking a price hike in the elevated pricing scenario and sustaining volumes at the same time will be a tight ropewalk. 

The brokerage remains cautiously Positive on the sector for FY23E and picks Dalmia Bharat as the best bet from the mid-cap cement segment with a target of Rs 2607 per share, which implies over 68 per cent upside in the share price. 

ShareKhan 

Dalmia Bharat has been affected by weak demand and pricing environment in the Eastern region which has been addressed from the start of Q4FY22. We expect it to see growth reverting in the March quarter and sustain in FY23 led by capacity additions and de-bottlenecking.  

Dalmia has corrected by over 20 per cent over the trailing two and half months and is currently trading at an EV/EBITDA of 9x its FY2024E earnings, which we believe is attractive, considering its strong earnings growth trajectory over the next three years.  

In Q4FY22, the average cement prices in the Eastern region rose by 10 per cent both year-on-year (YoY) and quarter-on-quarter (QoQ), amid price hikes undertaken during January and February 2022. Hence, we retain Buy with a price target (PT) of Rs. 2,300 per share (48 per cent upside). 

Motilal Oswal 

Dalmia Bharat Cement shares trade at 12.8x/10.3x FY23/FY24 EV/EBITDA ratio and an EV/t of US $108/US $88. With an expected improvement in earnings and its focus on continuous capacity expansions, without leveraging its balance sheet, we expect the stock to trade at higher multiples. 

The stock has corrected 28 per cent from August 2021 to March 2022 due to weak demand and pricing in the sector and a sharp rise in fuel prices. The latter remains at an elevated level. However, the cement demand and pricing have started to improve. 

We value Dalmia Bharat Cement at 12.5x FY24E EV/EBITDA to arrive at a target price of Rs 2,000 per share, an upside of 28 per cent from current levels and maintain a Buy rating on the stock.