DALBHARAT - DALMIA BHARAT LIMITED Share Price

Outlook by Management:
Dalmia Bharat's management remains optimistic about India's structural growth, expecting GDP to rebound to 7-8% despite near-term headwinds. Cement demand is projected to grow 6-7% YoY in Q4 FY25, driven by government capex acceleration and seasonal strength. Full-year FY25 industry demand is estimated at 3-4% growth.

Key Points:

1. Volume & Pricing:

   • Q3 volumes declined 2% YoY (6.7 MT), but sales from Dalmia plants grew 3.7%.
   • Cement prices improved in December 2024, with further hikes expected in Q4, though competitive intensity may cap gains.

2. Cost Optimization:

   • Targeting cost savings of INR 150"“200/ton by FY27 via operational efficiencies (lower fuel, logistics, and power costs).
   • Power/fuel costs fell 9% YoY (INR 1,005/ton) due to lower fuel prices and increased renewable energy (RE) share (33% in Q3, targeting 40"“45% by FY25).

3. Expansion & Capacity:

   • On track to reach 49.5 MT capacity by FY25 and plans to announce Phase 2 expansion (to 75 MT by FY28) within six months.
   • Focus on Northeast market: Clinker unit commissioning in Q2 FY26; demand expected to surge with infrastructure/hydropower projects.

4. Financials:

   • Q3 revenue declined 12% YoY (INR 3,181 Cr) due to weak pricing but improved 3% QoQ.
   • EBITDA fell 34.5% YoY (INR 511 Cr; INR 765/ton). Net debt rose marginally to INR 1,242 Cr (0.55x net debt/EBITDA).

5. Sustainability & CSR:

   • Commissioned 46 MW of RE capacity (total 252 MW operational).
   • Launched "Shuttle" Badminton Academy in Odisha to support youth sports.

6. Risks & Challenges:

   • Near-term demand volatility due to elections and monsoon disruptions.
   • Safety focus post-accident at Rajgangpur plant (no production impact, but power costs may rise temporarily).

Management reiterated confidence in long-term industry consolidation, ROCE improvement, and disciplined capital allocation (net debt/EBITDA ≤ 2x).

1. Question: Why were Q3 volumes flat despite seasonal strength, and what are the clinker utilization and operational metrics?
Answer: Volumes de-grew 2% YoY due to discontinued JP tolling; Dalmia plant sales grew 3.7%. Clinker utilization and regional details were not disclosed. Trade mix improved to 66%, blended cement to 85.1%, and fuel cost was INR1.31/kcal.

2. Question: What was the impact of the Rajgangpur plant accident, and how is management addressing leadership transitions?
Answer: The accident affected a captive power plant, slightly raising power costs. Production remains unaffected. Leadership transitions are managed via succession planning and internal talent, ensuring continuity.

3. Question: Why supply Central India despite lower margins, and will growth targets hold amid weak quarters?
Answer: Central India sales are EBITDA-accretive but lower-margin. Dalmia's 9M growth (4%) outpaced the industry. FY25 capex for Northeast is INR1,800Cr remaining.

4. Question: How profitable is Northeast, and how is coal sourcing managed amid regional risks?
Answer: Northeast profitability details weren't shared. Coal is sourced locally with 3-4 months' inventory; no disruptions expected. Competition is welcomed, given Dalmia's cost and brand strength.

5. Question: How do East/South regions compare in demand, and why did net debt rise?
Answer: East grew better than South. Net debt rose due to working capital and capex but will stabilize. FY25 capex is INR3,000Cr; FY26 guidance is INR2,500"“3,000Cr.

6. Question: Did Dalmia lose market share, and what safety measures are in place post-accidents?
Answer: Volatility stems from macro slowdown, not strategy shifts. Safety is prioritized via training, audits, and cultural changes.

7. Question: What is the status of JPA acquisition and expansion plans?
Answer: JPA's NCLT process is delayed due to litigation; bidding remains possible. Expansion to 75Mt by FY28 will be detailed in July.

8. Question: What are FY26 incentives and Q4 volume/power cost outlook?
Answer: FY26 incentives: INR90"“100/ton. Q4 industry demand may grow 6-7%; RE power share will rise to 40-45%, lowering costs.

9. Question: What drives the INR150"“200/ton cost reduction target?
Answer: Savings from energy efficiency (INR100"“125/ton) and logistics optimization (INR50"“75/ton), excluding pricing changes.

10. Question: How will pricing evolve amid East/South competition?
Answer: Consolidation and rational players may improve long-term ROCE despite short-term oversupply and competitive pricing.

11. Question: Are South India price hikes feasible amid new capacity?
Answer: South prices may stay pressured as acquired plants ramp up. Demand recovery is critical for stability.

12. Question: How will 75Mt expansion impact leverage, and what's FY26 demand outlook?
Answer: Capex will adhere to net debt/EBITDA <2x. Industry growth may hit 6-8% with consolidation improving ROCE long-term.

13. Question: Why did East volumes decline, and how were costs controlled?
Answer: Fixed costs were managed via hiring/marketing controls. Q4 demand is expected to improve with government spending.

14. Question: What drove Q3 realizations, and are current prices stable?
Answer: Realizations rose ~1.5% QoQ from December hikes. Prices are holding, with no further guidance on Q4 trends.