Buy Dalmia Bharat; target of Rs 1970: Prabhudas Lilladher

Moneycontrol • 5 days ago

Original source

Key Investment Pillars

  • Recent price hikes of ~INR15/bag in South and East regions are expected to partly offset higher costs and drive EBITDA recovery in Q3FY27.
  • Improving demand, especially in the second half of FY27, is expected to support volume growth in line with the industry at ~7-8%.
  • Management's target of annual cost savings of ~INR50-100/t and improving fixed-cost absorption are expected to contribute to margin expansion.
  • The company's expanding capacity base, including Central India assets, Belgaum, Pune, and Kadapa, is expected to strengthen its pan-India presence and support long-term growth.

Thesis Validation Checklist

  • Investors should watch for sustained price hikes and improving demand in the second half of FY27 to validate the EBITDA recovery thesis.
  • Monitor the company's ability to achieve targeted cost savings and improve fixed-cost absorption to support margin expansion.
  • Track the progress of new capacity additions, including Belgaum, Pune, and Kadapa, and their contribution to revenue and profitability growth.
  • Keep an eye on the company's debt levels and leverage, as management aims to keep it below 2.0x sustainably.