Dalmia Bharat earnings beat on realisations as acquired assets and expansions ramp up

Investment View and Key Catalysts

Motilal Oswal Financial Services Limited (MOFSL) retains its Buy recommendation on Dalmia Bharat following a 1QFY27 EBITDA beat led by better-than-expected cement realisations. The broker believes the principal catalysts are the ramp-up and integration of acquired JPA cement assets, timely completion of organic capacity expansion and improvement in capacity utilisation.

Near-term external cost pressure, integration execution and expansion delivery remain important monitorables.

1QFY27 Financial Performance

Dalmia Bharat reported consolidated 1QFY27 revenue of Rs 3,890 crore, up about 7 per cent year on year and 4 per cent above MOFSL's estimate. EBITDA declined about 9 per cent year on year to Rs 810 crore, but was about 10 per cent ahead of the broker's estimate. Operating margin fell 3.6 percentage points year on year to about 21 per cent, although it was 1.1 percentage points above MOFSL's expectation.

Adjusted PAT, excluding one-off costs, declined about 13 per cent year on year to Rs 320 crore, but was 51 per cent above estimate, helped by higher other income and a lower tax rate. Sales volume rose about 9 per cent to 7.6 million tonnes, broadly in line with estimates.

Cost Trends and Pricing

Cost pressure constrained profitability. Operating expenditure per tonne increased about 3 per cent year on year, reflecting increases of about 8 per cent in other expenses per tonne and 4 per cent in variable cost per tonne. Freight cost per tonne was flat year on year, while employee cost per tonne declined about 1 per cent on higher volumes.

Management said blended fuel cost increased to Rs 1.47 per kcal from Rs 1.36 per kcal in the previous quarter. It expects a Rs 70-80 per tonne input-cost increase in 2QFY27 due to the lagged impact of higher fuel costs.

• Renewable power accounted for 48 per cent, compared with 41 per cent in 1QFY26 and 47 per cent in 4QFY26.
• June 2026 exit prices were broadly stable across most regions, with price correction in West Bengal and modest improvement in the South.

Demand Outlook and JPA Asset Integration

Management expects cement-industry demand to grow about 7-8 per cent year on year in FY27. Dalmia Bharat expects organic volume growth broadly in line with the industry, supplemented by acquired-asset ramp-up and organic expansions.

Integration has progressed rapidly, with operations commencing at the Chunar grinding unit and trial production beginning at the Rewa clinker unit. Management expects the acquired assets to reach EBITDA break-even within the next few quarters and their EBITDA per tonne to converge with Dalmia Bharat's average over the next 7-8 quarters.

The JPA acquisition adds 5.2 million tonnes per annum of cement capacity and 3.3 million tonnes per annum of clinker capacity in Central India. Premium products represented 25 per cent of quarterly sales, versus 22 per cent in 1QFY26 and 24 per cent in 4QFY26.

Capex and Balance Sheet

Dalmia Bharat incurred Rs 110 crore of capex in 1QFY27 and retained FY27 capex guidance of Rs 2,200-2,400 crore. Around Rs 2,200 crore is planned for ongoing expansion projects, with the balance allocated to maintenance and refurbishment of acquired assets.

Net debt rose to Rs 4,430 crore from Rs 1,430 crore at March 2026 because of acquisition funding. Net debt to EBITDA was 1.47 times, below management's 2.0 times guidance.

Estimates and Valuation

MOFSL has incorporated the JPA acquisition in its FY27 and FY28 estimates and raised EBITDA estimates by about 3 per cent and 8 per cent, respectively. The broker forecasts FY26-28 revenue and EBITDA compound annual growth of 14 per cent and 15 per cent, respectively, and volume compound annual growth of about 12 per cent.

PAT growth is expected to remain muted over FY26-28 because expansion-related depreciation and interest costs will increase. MOFSL estimates EBITDA per tonne of Rs 951 in FY27E and Rs 1,058 in FY28E, versus Rs 1,015 in FY26. It forecasts FY27 net debt of Rs 6,050 crore and net debt to EBITDA of 2.3 times.

MOFSL values the company at 12 times FY28E EV/EBITDA to derive the Rs 2,250 target price.