Cement

Dalmia Bharat Ltd – Will it become a PAN India Player?

India's 4th largest cement manufacturers, with installed capacity of 37 MT.

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(A) About

Dalmia Bharat - Logo

Dalmia Bharat is the leader in super-specialty cement segment, which enjoys down-stream among manufacturers of railway sleepers, oil wells and airstrips. It is also the country's largest producer of slag cement.

Moreover, the company has emerged as one of the most respected cement manufacturers in India, Contributing to nation-building through adequate capacity creation, consistently high quality standards and value-added products.

Moreover, the company offers a range of cement variants through its brand portfolio of three marquee brands: Dalmia Cement, Dalmia DSP and Konark Cement. 

(B) Journey

Dalmia Bharat - journey

(C) Shareholding Pattern

Dalmia Bharat - Shareholding Pattern
Dalmia Bharat - Shareholdings

(D) Board Members

(E) Product Portfolio

Dalmia Bharat - Product Portfolio

Company offers a wide range of cement variants through their three marquee brands - Dalmia Cement, Dalmia DSP and Konark Cement.

Moreover, company is the category leader in super-specialty cement which is used in Airport tracks, nuclear power plant as well as in Oil wells.

(F) Product Mix

Dalmia Bharat - Product Mix

(G) Manufacturing Capacity

Dalmia Bharat - Capacity & Utilization

Company has 14 manufacturing units in 10 states, serving customer across 22 states with ~35000 dealers and sub dealers, currently having a capacity of 41.1MTPA.

(H) Peer Comparison of Dalmia Bharat Ltd

Dalmia Bharat - Peer Comparision
Dalmia Bharat - Market Share

UltraTech has the highest market share followed by ACC, Shree and Ambuja Cement, meanwhile Dalmia Bharat is more of a South-East player which is now expanding PAN India.

(I) Cost Structure

  • Dalmia Bharat - Cost Structure
  • Dalmia Bharat - Expenses

Raw material and power and fuel cost are the major expenses for the cement industry, the raw material cost of the Dalmia Bharat is going down and currently stood at 14.46%, while the power & fuel cost for the company increase significantly in 2022 and 2023 mainly due to increase in fuel prices.

Moreover, currently renewable energy contribute to 24% of the company total energy consumption which company aims to double by FY24.

(J) Financials

Dalmia Bharat - Financial Trend

Company has grown its revenue at 8.92% in past 7 years, while PAT grew at a CAGR of 57.01%.

Moreover, company has a current debt/equity ratio of 0.25 and aim to keep its Net Debt/EBITDA ratio less than 2x.

Asset to Equity improved from 7.1 to 1.6 while and Sales to total assets improve from 0.4 to 0.5.

(K) Management Discussion & Concall

(i) Sector Outlook

- Indian Cement production will climb by around 6-8% over fiscal FY23&24.

- Moreover, government has allocated $1.8Bn for creation of safe housing, clean drinking water, sanitation, increasing road and telecom connectivity, among other initiatives. Also allocated $9.8Bn to address urban housing shortages.

- However, growing housing sector typically accounts for 60-65% of India's cement consumption. And also continued large investments in road & infrastructure projects.

- Meanwhile, India built 12km of highways in 2022 and this will likely to continue in 2023-24.

(ii) Expansion to be a Pan-India player

- Company aim to reduce its exposure to the south-east region and by 2024 also to be present in the western, mid and northern regions as well.

- Moreover, company wants to expand its current capacity of 41.1MTPA to 54MTPA by the end of FY24 and to 75MTPA by 2027, 110-130MTPA by 2031.

- Company is further divesting its non-core business and allocating capital to its core business.

(iii) Disinvestment

Dalmia has sold 5.2%stake in IEX in FY22 and will be gradually divesting its balance 15% stake, it has also sold Hippo stores for Rs 155 Cr and sold its entire stake of Dalmia Refractories.

(iv) Acquisition

Signed an agreement for acquisition of the cement assets of JP associates in relation to acquisition of cement capacity of 5.2MTPA, clinker grinding capacity of 3.3MTPA and also thermal power plants of aggregate capacity of 280MW for an enterprise value of Rs 3230 Cr.

Concall Highlights Q4FY23

- During the year company has increased their capacity by 15% from 35.9MTPA to 41.1MTPA.

- In Q4 company's variable cost was slightly impacted due to inventory of clinker & cement, these inventory was built up for the upcoming plant shutdown and new bottlenecking projects.

- EBITDA/Ton for the full year stood at Rs 900 and for Q4 is Rs 951.

- Currently company has renewable energy capacity of 166MW and further aims to double the capacity to around 322MW by FY24.

- Moreover, company expects its future demand to grow at 9-10% CAGR.

(L) Strengths & Weaknesses

(i) Strengths

(a) Strong market position

With a track record of seven decades, the Dalmia Bharat group is the fourth-largest cement player (by capacity) in India, with operational capacity of 37 MTPA as on December 31, 2022. The group has outperformed the market, with revenue growing faster than overall cement demand over the past decade, resulting in gain in market share across key markets.

(b) Strong presence in fast growing eastern market with entry into central region to aid absorption of new capacities

The group derives majority of its volumes from the east and northeast markets. The company is also entering central region where the markets are expected to see higher growth than pan-India markets over the medium term. Further, this should aid in better absorption of the incremental capacity in the regions.

(ii) Weaknesses

(a) Moderate return on capital

The group has also undergone a few restructurings, resulting in recognition of intangibles. Further, it is undertaking capex of around Rs 15,000 crore by fiscal 2026. This should lead to a significant increase in capital employed, and also a resultant rise in depreciation and amortization expense, which in turn will lead to subdued return on capital.

(b) Susceptibility to risks related to volatility in input cost/realizations, and cyclicality in cement sector

Capacity addition in the cement industry tends to be sporadic because of the long gestation period for setting up a facility and large number of players adding capacities during the peak of a cycle. Further, this has led to unfavorable price cycles for the sector in the past.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry Publications.

Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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