Dalmia Bharat capacity expansion and JAL ramp-up support 11 per cent volume growth

Investment View and Key Thesis

Prabhudas Lilladher’s August 20, 2026 management-meet update retains a BUY rating on Dalmia Bharat and raises the target price to Rs 2,173 from Rs 2,079. The broker believes the company is positioned for a strong 11% volume CAGR over FY26-FY29E, supported by its entry into central markets and capacity additions in South and West India.

PL has introduced FY29 estimates but cut FY27E and FY28E EBITDA estimates by 2.6% and 1.1%, respectively, reflecting cost inflation and the initially weak contribution from central-region assets.

Capacity Expansion and Regional Strategy

Dalmia Bharat’s cement capacity is expected to reach 66.7 mtpa by Q3FY28. The company also has an option to add 2.5 mtpa of grinding capacity in East India, which could take capacity close to 70 mtpa by FY28-end.

The longer-term ambition of approximately 110 mtpa remains directional. Management intends to calibrate this target against industry demand, cash generation and leverage, rather than pursue expansion irrespective of market conditions. The next phase of expansion is expected to focus mainly on North, Central and West India, while further additions in the South will depend on improving utilisation.

JAL Asset Integration and Ramp-up

Integration of the JAL assets is progressing. Chunar has commenced operations, Rewa has begun trial runs for its grinding and clinker units, and Churk is being commissioned at a measured pace.

Initial JAL volumes are expected from Q3FY27. Utilisation is targeted at 35-40% in Q4FY27 and 50-60% in FY28. Integration is expected to take six to eight quarters, with JAL EBITDA per tonne targeted to reach Dalmia Bharat’s portfolio average by Q4FY28.

The 5.2 mtpa JAL assets provide a platform in Eastern Uttar Pradesh and Madhya Pradesh. Central India has approximately 100 mtpa of existing capacity, with a further 15 mtpa expected to be added.

Near-term Demand and Profitability Pressure

Near-term profitability is expected to remain under pressure. PL expects Q2FY27 operating costs to rise by Rs 150-200 per tonne, including Rs 70-80 per tonne from higher fuel costs and seasonal negative operating leverage. Packing costs remain elevated at Rs 12-13 per bag.

With pet coke prices remaining high, fuel costs may stay elevated in Q3FY27. PL estimates that EBITDA per tonne could decline by approximately Rs 200 due to price moderation, cost inflation and the weak early contribution from central assets.

Demand growth in Q2FY27 is expected to soften to 4-5% year-to-date because of monsoon effects in East and Northeast India. South India demand remains healthy at 6-7%, while Maharashtra demand is described as decent. Trade pricing is stable, whereas non-trade prices have moderated.

Cost Mitigation and Operating Efficiency

Cost mitigation is an important offset to near-term pressure. Dalmia Bharat is targeting approximately Rs 50 per tonne of savings in FY27 through a higher renewable-energy share, logistics optimisation and more direct dispatches.

• Renewable energy accounts for 48% of the energy mix, with more than 100 MW planned over the next 12 months.
• Direct dispatches have increased to approximately 65% from 55-56%.
• GPS truck tracking, warehouse conveyors, railway electrification, waste-heat recovery systems and electric-vehicle adoption provide additional efficiency levers.

PL forecasts an FY26-FY29E EBITDA CAGR of 14%, with volumes rising from 30.0 mt in FY26 to 40.9 mt in FY29E.

Valuation

PL values Dalmia Bharat at 11 times September 2028E EV/EBITDA, based on estimated EBITDA of Rs 43,087 million. This implies an enterprise value of Rs 473,952 million and a value per share of Rs 2,173 after debt and cash adjustments.

Key Risks

• Prolonged fuel-cost inflation.
• Softer cement pricing and demand.
• Slower-than-expected JAL ramp-up.
• Subdued near-term infrastructure activity in West Bengal.
• Rising competitive intensity in Northeast India as Shree Cement, Adani and JK Lakshmi expand.