Whalesbook
Emkay Global Retains 'Add' Rating on Dalmia Bharat Amid Expansion Drive
Analysts at Emkay Global Financial Services have reaffirmed their 'Add' rating on Dalmia Bharat shares, setting a firm target price of ₹2,450. This conviction stems from the management's unwavering focus on expanding production capacity and enhancing cost efficiency across its operations. The brokerage acknowledges potential headwinds in near-term demand and pricing, particularly within the East Indian market.
Aggressive Capacity Expansion Plans
Dalmia Bharat is aggressively pursuing its medium-term goal of reaching approximately 62 million tonnes per annum (MTPA) of cement capacity by the second quarter of fiscal year 2028. This represents a substantial increase from its current capacity of around 50 MTPA, supported by ongoing projects in Kadapa, Pune, and Belgaum. Looking further ahead, the company envisions scaling its capacity to nearly 70 MTPA. This long-term vision is bolstered by a proposed greenfield expansion of 5-6 MTPA in Jaisalmer, Rajasthan, alongside planned grinding unit (GU) expansions in the Northeast and eastern regions.
Strategic Jaisalmer Project and Resource Acquisition
The Jaisalmer project is identified as a crucial component in Dalmia Bharat's strategy to establish a pan-India presence, excluding Central India. Emkay Global noted post-management interaction that statutory approvals for this significant undertaking are progressing. Furthermore, the company has successfully secured essential limestone blocks at a competitive premium of approximately 22 percent. This, combined with state incentives, is expected to contribute to maintaining robust unit economics.
Northeast Expansion and Demand Trends
In the Northeast, Dalmia Bharat plans a swift expansion of 2–2.5 MTPA in grinding capacity. This will be supported by a new kiln at Umrangso, Assam. Regarding demand, the management observed an uptick in early December following a sluggish October-November period, which was affected by extended monsoons and inventory adjustments. Dalmia Bharat anticipates mid-to-high single-digit volume growth for the October-December quarter of FY26, with the second half of the fiscal year expected to align with broader industry trends. However, demand in parts of East India, excluding the Northeast, remains subdued due to electoral activities and administrative transitions.
Pricing Pressures and Profitability Focus
Weak demand in the current quarter has exerted downward pressure on cement prices, particularly in the non-trade segment, leading to a ₹20–25 per bag decline. Emkay Global highlighted that this is projected to cause a 3-4 percent quarter-on-quarter reduction in blended realizations. Despite these challenges, the management remains committed to disciplined execution and prioritizing profitability over aggressive volume expansion, especially in its eastern operations.
Cost Savings and Capital Expenditure
Dalmia Bharat aims to adhere to its capital expenditure (capex) guidance of ₹1,000–1,050 crore through FY28, excluding the Jaisalmer project. The company is on track to achieve operating cost savings of ₹150–200 per tonne by FY27. A portion of these savings, approximately ₹50 per tonne, has already been realized. Further benefits are anticipated from logistics optimization, improved clinker factors, increased renewable energy usage, and the elimination of the GST compensation cess on coal, which is projected to save ₹40–50 crore in FY26/27.
Stock Performance and Investment Strategy
Dalmia Bharat's share price saw a 2.2 percent gain on the National Stock Exchange (NSE) on Tuesday, reaching an intraday high of ₹2,060. Year-to-date in 2025, the stock has risen approximately 16 percent, with a 2 percent increase in the last month. Over three years, the stock has climbed 16 percent, and it has jumped 97.5 percent in the past five years. Emkay Global analysts believe the recent correction of around 20 percent over three months has largely factored in near-term pricing weaknesses, presenting a favorable entry point for investors. The brokerage anticipates an improvement in the industry pricing environment from January 2026, especially in East and South India.
Impact
The news is positive for Dalmia Bharat Limited, signaling strong growth prospects driven by strategic capacity expansion and cost management. Investors may see this as a favorable entry point, potentially leading to stock price appreciation. The broader Indian cement sector could also benefit from increased investment and operational efficiencies demonstrated by key players. The focus on expansion and efficiency is constructive for the sector's long-term outlook.
Impact Rating: 7
Difficult Terms Explained
- MTPA: Million Tonnes Per Annum. This is a standard unit for measuring the production capacity of cement plants.
- FY28: Fiscal Year 2028. In India, the fiscal year typically runs from April 1st to March 31st.
- GST: Goods and Services Tax. A consumption tax introduced in India in 2017.
- Greenfield Expansion: Building a new facility from scratch on undeveloped land.
- Grinding Unit (GU): A plant that grinds clinker with gypsum and other additives to produce cement. It does not involve clinker production.
- EV/Ebitda: Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization. A valuation metric used to compare companies.
- Clinker Factors: Refers to the ratio of clinker used in cement production, affecting quality and cost.
- Logistics Optimisation: Improving the efficiency and reducing the cost of transporting raw materials and finished goods.
- GST Compensation Cess on Coal: A tax component that was previously applied to coal. Its removal leads to cost savings.
- Blended Realizations: The average net selling price per unit of cement, considering different product types and market segments.