Asset,
Dalmia Bharat Limited has made progress toward its goal of producing cement as a pure play company. Dalmia Cement (India) Limited, its wholly owned subsidiary, has signed a legally binding agreement to sell its entire 42.36 percent stake in the refractory business to promoter group company Sarvapriya Healthcare Solutions Pvt Ltd. Ltd. It is anticipated that the transaction will close in thirty days. Dalmia Bharat’s management stated on Monday’s conference call that there is no possibility of delay.
The only non-core investment remaining with the company is the stake in the Indian Energy Exchange (IEX). Based on the slump sale, Dalmia India sold its 5.2% stake in IEX and sold its stake in Hippo Stores in FY22. Dalmia India currently owns approximately 15% of IEX, and management has informed analysts that it is considering selling additional stakes.
Because it is one of the issues that investors in Dalmia Bharat stock find to be problematic, reducing exposure to non-core assets is, in that sense, positive.
All things considered, this doesn’t change Dalmia Bharat’s profit standpoint or re-rating possibilities. ” The company benefits directly from the ongoing emphasis on the sale of non-core assets. “However, based on this transaction, which has a value of 800 crore, we have not revised our earnings estimates,” stated Rajesh Ravi, Institutional Analyst, Cement, HDFC Securities Ltd. The rate of cement capacity addition and sectoral diversification are the most important factors for a meaningful earnings revival. Concrete makers are pushing for limit extension to catch portion of the overall industry.
Dalmia Bharat intends to increase its FY24 capacity forecast from 49 mt to 54 mt. The management stated that completing the acquisition of some Jaiprakash Associates Ltd. cement assets will assist in this.
The company has reiterated its goal of reaching capacity of 75 million tons by FY27 and 110-130 million tons by FY31.
Government spending on infrastructure and related activities is expected to keep cement demand steady in 2023. Dalmia Bharat stock has lost about 1 percent so far this year, but major cement companies like UltraTech Cement Ltd. and Shree Cement Ltd. have generated positive returns.
While there is no doubt that there will be continued strong demand, various brokerages’ dealer channel analyses indicate that cement prices in India have not been able to maintain their current higher levels in the March quarter. One of Dalmia Bharat’s most important markets, South India, has been particularly hard hit by price volatility.
Additionally, the loan can still be monitored. Management of the company stated on the conference call that it intends to keep the key metric of net debt to EBITDA below 2x unless there is an inorganic growth opportunity. Earnings before interest, taxes, depreciation, and amortization are all included in Ebitda.
“A significant re-rating of the stock has already taken place since the company announced capital expenditure plans during July 2021,” according to Ronald Cioni, deputy vice president of research. BNP Paribas’ Sharekhan. ” Further re-rating will be driven by execution of their vision of being a skillet India player, sound interest/valuing climate in center locales and disinvestment of non-center resources like adaptation of staying 15% stake in IEX,” he added. .
According to Bloomberg data, Dalmia Bharat shares are worth 10.85 times FY24 EV/Ebitda. Enterprise value is EV. While the disinvestment center is great for the stock’s valuation, limiting the valuation hole with bigger friends will be a tall undertaking as rivalry increases.
