Dalmia Bharat volume growth and Jaypee asset ramp-up support earnings outlook

Investment View and Valuation

Geojit Investments Limited's August 10, 2026 company update retains a BUY rating on Dalmia Bharat Ltd. The positive view is based on expected volume growth, the ramp-up of acquired Jaypee assets from Q3FY27, ongoing capacity additions and the company's geographical expansion towards becoming a pan-India cement player.

Geojit values Dalmia Bharat at 12x EV/EBITDA and arrives at a target price of Rs 2,278.

Q1FY27 Financial Performance

Dalmia Bharat reported consolidated Q1FY27 revenue of Rs 3,890 crore, up 7.0 per cent year on year but down 8.4 per cent quarter on quarter. Cement volume rose 8.6 per cent year on year to 7.6 MT, outperforming estimated industry demand growth of 7-8 per cent. Management attributed improved demand in June to labour returning to construction sites after state elections.

Realisation, including ready-mix concrete, was Rs 5,118 per tonne, down 1.5 per cent year on year but up 6.1 per cent sequentially.

Q1FY27 EBITDA declined 8.8 per cent year on year to Rs 805 crore, while EBITDA margin fell 360 basis points to 20.7 per cent. EBITDA per tonne declined 16.0 per cent year on year to Rs 1,059. The margin decline reflected elevated operating costs, including higher power and fuel costs and other expenses.

Reported PAT declined 52.2 per cent year on year to Rs 188 crore, affected by Rs 182 crore of expenses related to the JAL acquisition. Adjusted PAT declined 15.1 per cent year on year to Rs 324 crore, primarily because of higher interest and depreciation following the debt-funded acquisition. Management expects input costs to increase by about Rs 70-80 per tonne sequentially in Q2FY27, indicating that cost pressure remains an important near-term consideration.

Jaypee Asset Integration and Balance Sheet

Management expects the acquired Jaypee assets to make a meaningful volume contribution from Q3FY27. It expects the assets to become EBITDA-neutral within a couple of quarters and to achieve EBITDA per tonne in line with Dalmia Bharat's average within the next 7-8 quarters.

Gross debt rose to Rs 9,108 crore following the acquisition, although management expects net debt to EBITDA to remain comfortably below 2x. Incentive accruals were Rs 45 crore in Q1FY27, while management reiterated FY27 incentive guidance of Rs 200 crore.

Capacity Expansion and Capital Expenditure

Dalmia Bharat maintained FY27 capital expenditure guidance of Rs 3,200-3,400 crore. The planned expenditure comprises about Rs 2,200 crore for ongoing expansion projects, Rs 200 crore for Jaypee asset improvement and efficiency expenditure, and the balance for maintenance and other high-return investments.

Following the Jaypee acquisition and expansions at Belgaum, Kadapa and Pune, cement capacity is expected to reach about 67 MT by Q3FY28. The company's longer-term directional capacity target is 110-130 MT by FY31, subject to industry conditions and capital-allocation discipline.

Management expects depreciation to increase by Rs 100 crore in FY27 as Jaypee assets and the Belgaum expansion are commissioned. A further Rs 100-250 crore increase is expected in FY28 as the Kadapa and Pune projects come on stream.

Revised Forecasts

Geojit's revised forecasts project revenue growth of 11.1 per cent in FY27E and 12.5 per cent in FY28E. EBITDA margin is expected to improve from 20.0 per cent to 21.5 per cent over the same period.

Key Drivers and Risks

The investment thesis depends on the successful integration and utilisation of Jaypee assets, sustained volume outperformance, capacity commissioning and the ability of price hikes to offset elevated input costs.

• Key drivers: Volume growth, the Jaypee asset ramp-up from Q3FY27, ongoing capacity additions and geographical expansion.
• Key considerations: Elevated power, fuel and other operating costs, higher interest and depreciation following the acquisition, and the expected increase in input costs in Q2FY27.