Dalmia Bharat capacity additions and cost savings support FY28 earnings growth

Investment View and Valuation

In its July 27, 2026 result update, ICICI Direct Research maintains a BUY rating on Dalmia Bharat. The broker’s view is supported by an expected acceleration in cement volumes from the acquired Jaiprakash Associates assets and ongoing capacity additions, along with an anticipated recovery in EBITDA per ton through operating efficiencies.

The broker’s revised target price is Rs 2,300, based on 11 times FY28E EV/EBITDA. Dalmia Bharat is described as India’s fourth-largest cement manufacturer, with cement capacity of 54.7 mtpa and clinker capacity of 30.4 mtpa. Its capacity footprint is concentrated in the east and north-east at about 54 per cent, followed by south India at about 31 per cent.

Q1FY27 Financial Performance

Dalmia Bharat reported consolidated operating income of Rs 3,890 crore in Q1FY27, up 7 per cent year on year but down 8.4 per cent sequentially. Sales volume increased 8.6 per cent year on year to 7.6 mtpa, while realisation declined 1.5 per cent year on year.

EBITDA declined 8.8 per cent year on year to Rs 805 crore and EBITDA per ton fell 16 per cent to Rs 1,059, as power and fuel costs and packaging-related expenses increased. EBITDA margin contracted to 20.7 per cent from 24.3 per cent in Q1FY26. PAT fell 52.2 per cent year on year to Rs 188 crore, including a one-time Rs 182 crore cost related to the acquisition of Jaiprakash Associates’ 5.2 mtpa cement capacity in central India.

Demand Outlook and Jaiprakash Associates Integration

Management expects Indian cement-industry demand to grow about 7 per cent in FY27E, aided by infrastructure expenditure and housing demand. It expects Dalmia Bharat’s organic volume growth to broadly track industry growth, with incremental volumes from the acquired Jaiprakash Associates assets and new projects.

The acquired assets are expected to contribute meaningfully from Q3FY27E, reach EBITDA breakeven within a couple of quarters and attain group-level profitability in seven to eight quarters. Management plans approximately Rs 550 crore of refurbishment and efficiency investment at these assets, including an 18 MW waste-heat recovery system, and sees further de-bottlenecking and brownfield expansion potential.

Capacity Expansion and Balance Sheet

Capacity expansion is a central driver of the broker’s thesis. The key projects and expected timelines are:

These projects should lift cement capacity to 66.7 mtpa by FY28E. Management has reiterated its 75 mtpa capacity objective for FY29E, although the longer-term 110-130 mtpa ambition may be delayed depending on demand, approvals and balance-sheet strength.

FY27 capex guidance is Rs 3,200-3,400 crore, excluding the Rs 2,850 crore acquisition cost. Net debt was Rs 4,431 crore after the acquisition, with net debt to EBITDA at 1.47 times, below management’s internal ceiling of 2 times.

Cost Outlook and Operating Efficiencies

Near-term cost pressure remains a concern. Management expects Rs 70-80 per ton sequential cost inflation in Q2FY27E because of the lagged effect of higher fuel and diesel costs. It cited elevated petcoke, freight and packing-bag costs following the West Asia conflict.

However, management reported structural savings exceeding Rs 150 per ton in Q1 from fuel-mix optimisation, inventory planning and sourcing initiatives. It continues to target sustainable annual savings of around Rs 50-100 per ton.

• Renewable energy accounted for 48 per cent of power consumption in Q1FY27.
• The company aims for 100 per cent renewable power use by FY30E.
• Premium products contributed 25 per cent of Q1 sales.
• The new Weather 365 product is intended to support product mix and realisations.

Earnings Estimates

ICICI Direct estimates Dalmia Bharat’s volumes to grow at about 9 per cent CAGR over FY26-FY28E. It forecasts revenue, EBITDA and PAT growth of about 12 per cent, 19 per cent and 23 per cent CAGR, respectively.

The broker forecasts EBITDA per ton to rise to Rs 1,212 in FY28E from Rs 1,028 in FY26, supported by efficiency measures and operating leverage.

Key Risks

• A slowdown in cement demand.
• Delays in capacity expansion.
• Higher commodity prices.
• Intense competition.