Recommendation from Construction Materials Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year. [EasyDNNnews:PaidContentStart]

Dalmia Bharat Limited : CEMENTING GROWTH POWERING INDIA

HERE IS WHY
✓  Strong market leadership
✓  Ambitious expansion pipeline
✓  Investing ahead of curve

I ndia remains one of the fastest growing economies in the world, with a projected GDP growth rate of 6.5 per cent in 2025–26. The country is adding incremental trillion dollars to its economy faster than ever, and this economic momentum is expected to support cement demand in the years ahead. Despite being the world’s second-largest cement producer, India's average per capita cement consumption remains around 295 kg, well below the global average of 500 kg, indicating significant headroom for growth. The Indian cement industry is projected to grow at a CAGR of 5.1 per cent from 2025 to 2030, driven by expansion in residential, infrastructure, commercial, and industrial sectors. Considering these factors, we recommend Dalmia Bharat Ltd as our Choice Scrip. It is engaged in the business of manufacturing and selling cement.

The company manufactures Portland Pozzolana Cement (PPC), Portland Slag Cement (PSC), Portland Composite Cement (PCC), and Ordinary Portland Cement (OPC). Dalmia Bharat has a cement capacity of 49.5 MnT, spread across 15 plants and serving 23 states. The company holds a well-diversified footprint across key regions. On the sustainability front, Dalmia Bharat is aggressively scaling renewable energy (RE). Operational RE capacity is targeted at 576 MW by FY26, a 34x jump from FY20, which will lower power and fuel costs while supporting its long-term low-carbon strategy.

In FY25, Dalmia Bharat’s sales mix was led by PPC at 42 per cent, followed by PCC at 31 per cent, OPC at 15 per cent, and PSC at 12 per cent. In Q1FY26, on a consolidated basis, the company reported revenue of ₹3,636 crore, an increase of 0.41 per cent YoY compared to ₹3,621 crore in the same quarter last year. Net profit stood at ₹395 crore, rising 172.41 per cent YoY from ₹145 crore.

Dalmia Bharat is pursuing an ambitious pan-India growth plan through a mix of greenfield and brownfield projects. Key initiatives include a 3 MnT greenfield unit at Pune and a 3 MnT brownfield expansion at Belgaum by FY27, with a combined capex of ₹3,520 crore. Additionally, the company is expanding 6 MnT at Kadapa, setting up a 3 MnTPA bulk terminal at Chennai, and has announced ₹6,800 crore capex over FY26–28 to increase grinding capacity to 61.5 MTPA from 49.5 MTPA. Further plans include a 2–2.5 MTPA grinding unit in the North-East, a greenfield integrated plant at Jaisalmer and investments in waste heat recovery, solar power, and efficiency optimisation. These steps are aligned with the company’s long-term vision of reaching 75 MTPA by FY28 and 110–130 MTPA by FY31.

The company plans to fund its upcoming expansions through a mix of internal accruals and debt, while maintaining net debt/EBITDA below 2x. As of Q1FY26, gross debt stood at ₹6,456 crore, with net debt at ₹873 crore, translating into a comfortable net debt/EBITDA of 0.33x.

Management has also set a cost optimisation target of ₹150–200 per ton over the next two years, to be achieved through higher renewable energy adoption, logistics optimisation, and operational efficiency measures across plants. The group also divested 4.1 per cent stake in IEX during June 2025 and currently holds 10.8 per cent stake, valued at ₹1,861 crore as on June 30, 2025, which should act as a buffer in case of liquidity constraints. On the valuation front, the company’s shares are trading at a PE of 48.8x, compared to the industry average of 50.8x. The shares of the company offer a dividend payout ratio of 25 per cent. Considering these factors, we recommend a BUY.

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