Dalmia Bharat capacity expansion and pricing strength support sustainable cement earnings growth

Investment View and Target Price

In its July 24, 2026 Q1 FY27 result update, Choice Equity Broking retained its BUY rating on Dalmia Bharat Ltd and its unchanged target price of Rs 2,405 per share, compared with the CMP of Rs 1,809. The broker remains constructive on the company because of its planned expansion towards 110–130 MTPA from current capacity of 54.7 MTPA, a supportive cement-pricing environment, disciplined capital allocation and the synergy potential from the JP Assets acquisition.

Choice believes the acquisition can create value through greater scale, operating efficiency and market expansion.

Q1 FY27 Financial Performance

Dalmia Bharat reported consolidated Q1 FY27 revenue of Rs 38,900 million, up 7.0 per cent year-on-year but down 8.4 per cent quarter-on-quarter. EBITDA was Rs 8,050 million, down 8.8 per cent year-on-year and 10.8 per cent quarter-on-quarter. Revenue and EBITDA exceeded Choice Institutional Equities estimates, while reported PAT was below the broker estimate.

Cost Pressures and Profitability

Higher operating costs eroded the benefit of better pricing. Total cost rose to Rs 4,059 per tonne, up 3.2 per cent year-on-year and 6.9 per cent quarter-on-quarter, versus Choice's estimate of Rs 4,037 per tonne. EBITDA per tonne was Rs 1,059, above the broker estimate of Rs 941 but down by about Rs 202 per tonne year-on-year. EBITDA margin declined 359 basis points year-on-year to 20.7 per cent.

Higher power and fuel costs, employee costs, packaging expenses and raw-material costs were important pressures on profitability.

Demand, Pricing and Operating Initiatives

Management expects medium-term cement demand to remain supported by government capital expenditure, private consumption, urbanisation, PMAY execution, infrastructure spending and improving urban housing activity. Management indicated that pan-India cement prices improved sequentially in Q1 FY27.

• The premium-product mix reached an all-time high of 25 per cent.
• Trade contribution stood at 66 per cent.
• Blended cement remained above 80 per cent.
• Inventory management and operational initiatives mitigated more than Rs 150 per tonne of potential fuel-cost inflation.

Capacity Expansion and Balance Sheet

Commercial dispatches from the acquired Chunar facility began within 22 days of acquisition. Installed cement capacity is expected to rise to 66.7 MTPA by Q3 FY28, supported by brownfield projects at Belgaum, Kadapa, Pune and Chennai. The company's broader planned expansion is towards 110–130 MTPA from its current capacity of 54.7 MTPA.

Management reported Net Debt to EBITDA of 1.47x, indicating capacity for expansion capex despite acquisition-led debt growth.

Earnings Outlook and Estimates

Choice forecasts a cost headwind of around Rs 100–120 per tonne in Q2 FY27E, but expects favourable pricing, cost optimisation and a higher renewable-energy share to limit the impact. It estimates FY27E EBITDA per tonne of about Rs 972.

Choice's FY26–FY29E EBITDA CAGR forecast is about 9.0 per cent, driven by the projected volume and realisation growth. Following Q1 FY27, Choice raised FY27E revenue by 2.5 per cent but reduced FY27E EBITDA by 2.3 per cent and PAT by 3.5 per cent.

Valuation and Key Risks

The target price of Rs 2,405 is based on an EV/CE framework using a 1.6x FY28E multiple.

• Volatility in pet coke and coal prices.
• Supply disruption arising from geopolitical events.