On Monday, JPMorgan (NYSE:JPM) initiated coverage on Dalmia Bharat Ltd (DALBHARA:IN) stock with an Underweight rating and a price target of INR 1,550. The financial firm's assessment is based on a valuation of 9 times the company's four-quarter rolling forward EBITDA.
This target is notably lower than the valuations of Dalmia Bharat's peers but suggests a forward price-to-earnings ratio of approximately 26 times for the fiscal year 2026.
The analysis pointed out that while Dalmia Bharat's EBITDA margins and EBITDA per metric ton are on par with its industry counterparts, the company struggles with significantly lower net margins due to its higher financial leverage.
Specifically, Dalmia Bharat's depreciation costs represent about 56% of its EBITDA, which is considerably higher compared to the 24-29% range for peers such as UltraTech Cement, Ambuja Cements, and ACC Limited, and 42% for Shree Cement.
The report also noted that on a headline basis, Dalmia Bharat's non-current assets per metric ton are 60% higher than those of Shree Cement and 22% higher than ACC's.
Despite these financial leverages, the company is projected to have relatively high three-year profit after tax (PAT) growth projections, although it faces weak EBITDA growth compound annual growth rate (CAGR) forecasts.
JPMorgan acknowledged that Dalmia Bharat is expected to benefit from the near-term recovery in cement demand and prices. However, the firm also expressed concerns regarding uncertainties in volume growth and utilization rates, which underpin the Underweight rating.
The report concluded by stating that the announcement of new growth projects or cost initiatives could pose key upside risks, while delays in execution and pricing pressure could have a negative impact on the company's performance.
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