Dalmia Bharat Share Price Target at Rs 2,273: Prabhudas Lilladher
Prabhudas Lilladher has issued an "Accumulate" recommendation on Dalmia Bharat (DALBHARA), with a revised target price of Rs2,273, up from Rs2,117. The research underscores the company’s strategic positioning to capitalize on higher cement prices in the South and East, ongoing capacity expansions, and robust cost-efficiency initiatives. While demand in key regions remains subdued due to seasonal monsoons and political transitions, Dalmia Bharat’s operational resilience and forward-looking capex plans are expected to drive a significant uptick in earnings over FY25-27. Investors are advised to monitor the outcome of the Jaypee asset acquisition, which could further accelerate growth and market share in the Central region.
Executive Summary
Prabhudas Lilladher recommends an "Accumulate" call on Dalmia Bharat, citing resilient near-term performance driven by higher cement prices, a stable cost structure, and aggressive capacity expansion initiatives. Despite muted demand in the Eastern region and weather-related disruptions, the company’s focus on cost savings and renewable energy integration positions it for robust EBITDA growth. The revised target price of Rs2,273 reflects confidence in Dalmia Bharat’s ability to deliver a 14% revenue CAGR and a 58% PAT CAGR over FY25-27. Investors should keep a close eye on the Jaypee asset acquisition, which could be a game-changer for the company’s Central region strategy.
Key Investment Thesis
1. Elevated Cement Prices to Bolster Earnings
Cement prices in the East and South have risen by approximately Rs12 and Rs35 per bag, respectively, compared to Q4FY25 averages, despite a modest correction in June attributed to early monsoons. This price resilience, particularly in the South where demand has historically been stronger, is expected to drive a Rs200-250 per tonne quarter-on-quarter increase in EBITDA from the Q4FY25 base of Rs926 per tonne.
2. Demand Headwinds Offset by Strategic Positioning
While the Eastern region has experienced sluggish demand for five consecutive quarters, and the Southern market is now feeling the impact of monsoon-induced disruptions, Dalmia Bharat’s diversified regional presence and strong government spending in infrastructure are expected to cushion the impact. The management anticipates a demand recovery post-monsoon, with industry growth projected at 7-8% in FY26.
Expansion and Capex Outlook
3. Aggressive Capacity Expansion Underway
Dalmia Bharat has initiated Rs35bn worth of expansion projects at Belgaum and Pune, targeting completion by FY27 to reach a total capacity of 55.5mtpa. The company is also planning two additional projects, each with 6mtpa capacity, through a mix of greenfield and brownfield routes. These initiatives, combined with potential acquisitions, could fast-track the company’s ambition to reach 75mtpa by 2028.
4. Cost Optimization and Renewable Energy Integration
The company is targeting cost savings of Rs150–200 per tonne by FY27, with half of these savings expected to materialize in FY26. Key drivers include increasing the renewable energy mix from 36% to 45–50% and reducing logistics costs through improved truck utilization and dedicated fleet management. These measures will reinforce Dalmia Bharat’s position as one of the lowest-cost cement producers in India.
Financial Performance and Valuation
5. Upgraded Earnings Estimates and Valuation Metrics
Incorporating recent price hikes and the latest annual report, Prabhudas Lilladher has upgraded its EBITDA estimates for FY26 and FY27 by 4.4% and 6%, respectively. The stock currently trades at 11.9x/10.2x EV/EBITDA on FY26/27E, with a price-to-earnings multiple of 25.9x/23.1x. The revised target price of Rs2,273 is based on 11x EV/Mar’27E EBITDA, reflecting the company’s improved earnings trajectory and operational leverage.
6. Key Financial Highlights
| Metric | FY25 | FY26E | FY27E |
|---|---|---|---|
| Sales (Rs m) | 1,39,800 | 1,60,556 | 1,82,441 |
| EBITDA (Rs m) | 40,930 | 34,341 | 40,453 |
| PAT (Rs m) | 7,240 | 15,227 | 17,012 |
| EPS (Rs) | 38.6 | 81.2 | 90.7 |
| EBITDA/t (Rs) | 819 | 1,083 | 1,140 |
| RoE (%) | 4.3 | 8.4 | 8.7 |
Strategic Developments and Risks
7. Jaypee Asset Acquisition: A Potential Catalyst
Dalmia Bharat has resubmitted its bid for Jaiprakash Associates’ cement assets, which include 6.7mtpa clinker and 9.4mtpa grinding units. If successful, this acquisition could substantially enhance the company’s market share in the Central region and expedite its capacity ramp-up. However, the outcome remains uncertain, with multiple aggressive bidders in the fray and the final decision expected within the next 1–2 weeks.
8. Legal and Regulatory Overhangs
The company is pursuing legal recourse regarding a Rs2.5bn outstanding incentive revocation in West Bengal for the 2017-19 period. While this is not material to the investment thesis, resolution of this issue would provide additional clarity and potential upside.
Stock Levels and Investor Targets
9. Investment Levels and Target
Current Market Price (CMP): Rs2,100
Target Price (TP): Rs2,273
52-Week High/Low: Rs2,187 / Rs1,601
Recommended Action: Accumulate for a 5–15% upside
Key Support Level: Rs1,950
Resistance Level: Rs2,200
Long Term Investment View
Dalmia Bharat is poised for a robust earnings recovery, underpinned by higher regional cement prices, disciplined cost management, and ambitious capacity expansion plans. Investors are advised to accumulate the stock at current levels with a target of Rs2,273, while closely monitoring the outcome of the Jaypee asset acquisition and demand normalization post-monsoon. The stock’s valuation remains attractive relative to its growth prospects, and the company’s strategic initiatives are expected to yield significant shareholder value over the next two years.
