Down over 39% from recent highs! This midcap stock in bear grip could reverse trend

The company’s shares ended flat on BSE. Brokerages have maintained their bullish stance on the company after it reported earnings for the quarter ended June 2022.

Yes Securities likes Dalmia Bharat because of its stronghold in east/south key markets. The company is set to be the 2nd largest player in the east by FY24E with 15% capacity share and seeking new markets with a target expansion of 110-130MTPA by FY31. Also, the cost optimisation measures (WHRS/green power to 170MW) are set to improve efficiency.

The brokerage house has a ‘Buy’ call on the stock with a target price of Rs 2,565, signaling a potential upside of 64 per cent in the counter, from its previous close of Rs 1559.15 on Wednesday.

However, Yes Securities also expects the power cost to remain elevated in H1FY23 and will continue to pose challenges, but gradual moderation is expected from H2FY23 onwards. Most of the new capacities for the sector will be commissioned in the Eastern region, hence cement prices & demand sustenance will be the key monitorable.

According to Axis Securities, the company’s Q1FY23 performance has been better than expected and its expansion plans are progressing well which will help it further consolidate its position in its operating regions. Dalmia Bharat is confident of better demand momentum in FY23. However, current high energy prices are posing challenges and we expect the cost to remain elevated in H1FY23 and thereafter slowly moderate in H2FY23, it said.

“Given the company’s superior positioning in key markets of East and South, exposure to West region, the government’s keen focus on infrastructure and low-cost affordable housing, increasing real estate demand, new capacity ramp-up along with the company’s cost optimization measures, we expect DBL to improve its market share and deliver decent performance going forward. The stock is currently trading at 12.5x and 9.5x FY23E and FY24E EV/EBITDA. We value the company at 11x FY24E EV/EBITDA to arrive at a target price of Rs 1,850/share,” the brokerage firm added.

Dalmia Bharat reported a 26.78 per cent decline in its consolidated net profit to Rs 205 crore for the first quarter ended June 30. The company had posted a net profit of Rs 280 crore during the April-June quarter a year ago. Revenue from operations increased 27.44 per cent to Rs 3,302 crore during the quarter under review against Rs 2,591 crore in the corresponding period of the previous fiscal.

Commenting on the quarter gone by, Puneet Dalmia, Managing Director & CEO – Dalmia Bharat Limited, said, “While we may be in the midst of global economic headwinds and trade turmoil, we are cautiously optimistic with regards to the medium- & long-term growth of the Indian Economy. We remain confident that the government’s push for capital expenditure as well as a constant focus on infrastructure development will continue to boost cement demand.”

He further added, “The continuous efforts and resilience of our teams have enabled us to deliver yet again a good performance on the back of strong volume growth and continuous cost leadership. We are committed to delivering industry leading returns to our stakeholders through our sustainable business model and a robust governance mechanism.”

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)