HDFC Secs trims target on Dalmia Bharat; keeps 'Buy' on long-term growth

The brokerage remains positive on Dalmia Bharat's long-term growth prospects, backed by volume expansion, margin improvement and a disciplined balance sheet

Don't want to miss the best from Business Standard?

HDFC Securities has reiterated ‘Buy’ on Dalmia Bharat stock, but has cut the target to ₹2,420 per share from ₹2,574, valuing the stock at 12 times Sep-27E consolidated Earnings before interest, tax, depreciation and amortisation (Ebitda). However, the brokerage remains positive on the cement maker’s long-term growth prospects, backed by volume expansion, margin improvement and a disciplined balance sheet, even as it factors in slightly softer near-term earnings.

 

“We have lowered our Ebitda estimates by 4 per cent/3 per cent/8 per cent for FY26/27/28E, as we have lowered our volume compound annual growth rate (CAGR) assumption by 2 percentage points and slightly trimmed margin estimates,” the brokerage said. 

Volume growth seen improving from H2FY26

Dalmia’s consolidated volumes declined 1 per cent year-on-year (Y-o-Y) in H1FY26, impacted by the termination of its tolling arrangement with Jaiprakash Associates (JPA) in the central region and a sharper focus on profitable sales.

 

HDFC Securities expects growth to pick up from H2FY26, supported by a demand boost from the goods and services tax (GST) rate cut on cement and income-tax rebates, easing working-capital pressure in the trade channel after a 10 percentage-point GST cut in September 2025, and ramp-up of expanded capacity in the north-east.

 

Further, analysts forecasts 7 per cent Y-o-Y volume growth in H2FY26 and consolidated volume CAGR in FY25–28E each. Net sales realisation (NSR) is seen growing at about 2.7 per cent CAGR over the same period, aided by recent price recovery in the south and east, rising share of higher-margin north-east volumes, cost levers to offset royalty, and GST incentive headwinds.  ALSO READ | India IT sector nearing FY27 revival; AI ramp-up to be key, says Nomura 

On costs, the brokerage highlighted that Dalmia is working on multiple levers to reduce operating expenses by ₹150–200 per tonne over FY26–28. The company plans to raise the share of green power through the group captive route to about 60 per cent in FY27 from 27 per cent in FY24 and 36 per cent in FY25, lower its clinker factor, increase the use of alternative fuels to cut raw material and energy costs, and improve logistics through higher direct dispatches, reduced secondary lead distance, better fleet utilisation and warehouse optimisation. 

 

It also aims to operationalise captive coal mines in Madhya Pradesh, which should contribute to savings from FY28, while the recent reduction in coal cess is expected to yield about ₹20 per tonne savings from Q3FY26. These benefits, HDFC Securities believes, will more than offset headwinds from an increase of about ₹40 per tonne in limestone royalty in Tamil Nadu from Q1FY26 and a roughly ₹30 per tonne reduction in GST incentive accruals from Q3FY26. As a result, it projects unit Ebitda rising to ₹1,196 per tonne in FY28, from ₹820 per tonne in FY25 and ₹1,136 per tonne in H1FY26.  ALSO READ | Nomura maintains 'Buy' on M&M, identifies the automaker as its top OEM pick

Aggressive organic expansion to 62 mn tonnes by FY28

Dalmia Bharat is in the midst of a sizeable organic capacity build-out:

 

Assam plant:

• 3.6 mn tonne greenfield clinker plant in Assam under trial run
• Commercial operations expected in Q3FY26

Southern & western expansions:

• Recently announced 12 mn tonne cement capacity across Andhra Pradesh, Karnataka and Maharashtra
• Includes a bulk terminal in Chennai
• Target commissioning by H1FY28

The brokerage estimates ₹1,140 crore capex over FY26–28E with capacity milestone of 75 million tonnes by FY29–30E, against earlier FY28 target, while keeping net debt/Ebitda below 2 times. It also notes Dalmia’s optionality from ₹160 crore worth of Indian Energy Exchange (IEX) shares, which can be monetised to support capex if needed.  Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.