On Tuesday, Citi reaffirmed its Buy rating on Dalmia Bharat Ltd (DALBHARA:IN) stock, with a steady price target of INR2,150.00. The firm's analysis pointed to a second-quarter EBITDA of approximately INR4.3 billion, a decline of around 27% year-over-year.
This drop was attributed to weaker realizations, which decreased by 10% compared to the previous year, overshadowing the benefits of an 8% increase in volumes and a 4% reduction in costs.
The earnings before interest, taxes, depreciation, and amortization (EBITDA) per tonne stood at INR650, falling from INR905 in the first quarter and INR960 in the same period last year. The management of Dalmia Bharat Ltd indicated that cement prices in the South and East regions dipped by 5-7% quarter-over-quarter.
However, there is an expectation of a price rebound due to rising demand, although this is contingent on the level of competitive intensity in the market. The prices in October 2024 were reported to be in line with the second quarter's average.
Despite the current concerns regarding the company's market share strategy and potential delays in growth plans, which could result in the stock remaining within a certain range for a while, Citi continues to endorse a Buy rating. The valuation of Dalmia Bharat, with an enterprise value per tonne at $85, is believed to have factored in these concerns.
Citi's outlook includes a forecast for Dalmia Bharat to achieve approximately 9% volume growth in the financial year 2025, which would be 1.5 times the growth rate of the industry. The firm also notes that potential cost benefits from green energy initiatives and operational efficiencies, along with opportunistic price increases, could provide positive momentum for the stock.
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