The shares of Dalmia Bharat is rallying on the back of a big upgrade from UBS. The international brokerage firm has changed its recommendation to ‘Buy’ from ‘Sell’. The share price of Dalmia Bharat has delivered 3% return over the past 5 trading sessions.
What is driving this upgrade? Let’s take a look at the four key reason why the brokerage sees potential in Dalmia Bharat:
UBS on Dalmia Bharat: Attractive valuation and growth potential
The brokerage firm, UBS believes that Dalmia Bharat’s valuation presents an investment opportunity, especially with the broader cement sector witnessing demand recovery.
“We upgrade Dalmia from Sell to Buy, given its attractive valuation and the sector’s demand and margin tailwinds,” the brokerage said in its report.
ALSO READNSE IPO Countdown: SEBI Chairman’s views, expected timeline & 3 things investors must know
While UBS is not factoring in the company’s aggressive guidance on capacity expansion, it expects Dalmia to outperform the industry marginally in terms of volume growth. In addition, demand and pricing in eastern India are expected to rebound from a low base, while ongoing consolidation in the southern market could aid profitability in the medium term.
The brokerage in its report forecasts an 18% CAGR growth in EBITDA over FY25-27, making Dalmia an attractive bet at 10x FY27E EV/EBITDA, a significant discount of over 40% to the industry’s top three players.
UBS on Dalmia Bharat: Capacity expansion strategy n focus
Despite delays and uncertainties regarding the potential Jaypee acquisition, Dalmia is set to add 2.9 million tonnes per annum (mtpa) in Q4FY25, with another 6 mtpa expected in Q4FY27, noted the brokerage in its report.
Furthermore, the brokerage in its report “We expect the demand revival in the east and distribution ramp-up in central India to offset any market share losses in the south.” The brokerage also pointed out that Dalmia’s current capacity utilisation stands at 60%, indicating room for improved efficiency before aggressive expansion.
Even if Dalmia misses its FY28 capacity target of 75 mtpa, the brokerage believes the valuation still justifies an upgrade, given the deep discount to its larger peers.
UBS on Dalmia Bharat: Margin expansion with potential upside
The brokerage is optimistic about the cement maker’s profitability, with EBITDA per tonne to increase from approximately Rs 850 in FY25 to over Rs 1,000 in FY27.
» Read More
