Dalmia Bharat Limited — Investor Meet, 24-01-2025: Analysts/Institutional Investor Meet/Con. Call Updates

1. Financial Performance: Dalmia Bharat reported a revenue decline of 12% YoY to ₹3,181 crore, attributed mainly to lower cement prices amid a broader slowdown in cement demand, which grew only modestly in the third quarter. EBITDA fell 34.5% YoY to ₹511 crore, translating to ₹765 per ton. However, on a QoQ basis, revenues saw a 3% recovery due to a price uptick in December. The company’s total cement sales volumes declined by 2% YoY, but sales from Dalmia plants increased by 3.7% YoY.

2. Future Outlook and Growth Drivers: The company anticipates a rebound in cement demand, expecting a 6% to 7% year-over-year growth in Q4, bolstered by seasonal factors and increased government capital expenditure, which has risen 21% YoY. Dalmia Bharat aims to further optimize costs, targeting savings of ₹150-₹200 per ton by financial year 2027.

3. Order Book and Operational Updates: The cement capacity is on track to reach 49.5 million tons by the end of FY25, with plans for a Phase 2 expansion to 75 million tons by FY28. Significant capex of around ₹3,000 crore is earmarked for FY25, focusing on projects in Northeast India and Bihar.

4. Analyst Q&A Insights:

- Revenue and Profitability: Analysts expressed concerns about volume growth and pricing power amidst competitive pressure. Management reaffirmed their commitment to maintaining margins and emphasized an increase in the premium product mix.

- Market Position: Management acknowledged increased competitive intensity in the South but is optimistic about long-term consolidation in the sector.

- Operational Challenges: The shutdown of a power plant due to an accident was addressed, minimizing forecasted production impacts, but potential cost increases were flagged due to grid power sourcing.

- Capex Decisions: The management indicated discipline in capital allocation, aiming to avoid exceeding a net debt-to-EBITDA ratio of 2x, while remaining cautious regarding future expansions considering macroeconomic conditions.

5. Market or Regulatory Updates: Current market dynamics suggest relatively weak pricing power, particularly in the South due to capacity expansions and market competition.

6. Strategic Focus Areas: The company is focused on cost optimization, product premiumization, and cultivating strategic partnerships to enhance market position, reflecting a long-term vision for growth amid current challenges.

7. Investor Insight: Dalmia Bharat's fundamentals suggest notable short-term challenges stemming from pricing and volume volatility but with a robust strategy for long-term growth and market positioning. This scenario leans towards a ‘hold’ position as investors await clarity on future demand recovery and operational improvements.