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Brokerages bullish on this cement stock, expect shares to gain up to 21%

Stock,

MK Global, Motilal Oswal, Axis Securities, and Sharekhan are among the brokerage firms that have reiterated their “Buy” recommendation for Dalmia Bharat Ltd., pointing to the company’s strong growth potential as a result of adding capacity. Their target price for the stock is 1,750, which is higher than the current market price of 2,260. On Monday, Dalmia Bharat Share 1,858.90 On Tuesday, the stock was down 1.73 percent, or 1,836.95, to Rs.

Here’s what the brokerage has to say:

Axis Securities

Dalmia India continues to implement its exit strategy from investments and non-core businesses. In accordance with this strategy, it has agreed to sell all 1,87,23,743 equity shares in its investment. 10 each (42.36% of the offer capital) of Dalmia Bharat Refractories Ltd. on thought 800 crores.

The brokerage anticipates that cement demand will grow at a CAGR of 7%-8% between FY2022-FY25E due to increased government capex on infrastructure and housing and strong real estate demand.

At an appealing EV/tonne of $90 and $87, respectively, the stock trades at 10x FY24E and 9x FY25E EV/EBITDA.

For the stock to reach the target price, the brokerage maintains a “Buy” rating and values it at 11 times FY25E EV/EBITDA. 2,260 per share, an increase of 21% from the previous price of 2,120 per share.

Motilal Oswal

The business appraises that the organization’s net money remembering ventures for IEX Against the assessed net obligation of 4.1 billion in FY24 2.4 a long time back. Its EPS will be 47.6 compared to 47.1 in FY24E. Dalmia Bharat is valued by Motilal Oswal at 12.5 times Sep 24E EV/EBITDA, up from the previous 2,155,220. It stated, “Reiterate our Buy rating on the stock.”

MK Dalmia Bharat’s board has approved the sale of its entire 42.36 percent stake in Dalmia Bharat Refractories (DBRL), which is owned by its subsidiary, to Sarvapriya Healthcare Solutions Pvt Ltd for $8 billion. The above transaction generally aligns with the company’s strategy to sell off non-core businesses and investments and transform Dalmia into a pure-play cement company. The stock is subject to a “hold” call from the brokerage, and their price target is Rs. 1,750.

Sharekhan by BNP Paribas Dalmia continues to concentrate on its plans for growth and keeps its promise to divest non-core assets while balancing growth and preserving the firm’s sound balance sheet. By 2031, the company intends to achieve a capacity of 110-130 MTPA at a rate of 14-15 percent CAGR, with a target of less than 2 times EBITDA.

The company’s long-term goal is to become a pan-India pure play cement company with a significant presence in each market it operates in.

Dalmia currently trades at 12x/11x EV/EBITDA to its earnings for FY2024E and FY2025E. Given the 17 percent CAGR in net earnings for FY2023E and FY2025E, we believe this provides additional upside potential. As a result, the brokerage has kept its “Buy” rating and the same price target of 2,250.

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