Geojit Financial Services has started coverage on Dalmia Bharat with a 'BUY' rating and a price target of ₹2,278. The brokerage outlook comes after the company reported a 52% dip in Q1 FY27 profit, largely due to one-time expenses from its recent cement asset acquisition. Investors are now monitoring how effectively these new assets will contribute to growth in the coming quarters.
Geojit Financial Services has issued a 'BUY' rating on Dalmia Bharat, setting a target price of ₹2,278 per share. This assessment follows the company’s recent first-quarter results for fiscal year 2027, where financial performance showed a mix of volume-driven revenue growth and short-term pressure on bottom-line figures due to acquisition-related spending.
Financials and Acquisition Costs
In the first quarter of FY27, Dalmia Bharat reported a net profit of ₹188 crore, a 52% decrease compared to the same period last year. This sharp drop in profit was primarily driven by a one-time charge of ₹182 crore related to the acquisition of cement assets from Jaiprakash Associates. While profits took a hit, the company’s top-line revenue grew by 7% to ₹3,890 crore, supported by a 9% rise in cement sales volume. The acquisition of these assets, which added 5.2 million tons to its capacity, brings the company's total cement production capacity to approximately 54.7 million tons.
Margin Pressure and Outlook
Profit margins remained a focal point for the quarter, with EBITDA margins contracting by 360 basis points to 20.7%. Management attributed this decline to elevated operational expenses, specifically higher costs for power and fuel. The company has indicated that these cost pressures are likely to persist through the second quarter of fiscal year 2027, with input costs expected to rise slightly on a per-ton basis. However, the brokerage report highlights that the long-term outlook remains positive, as the company expects meaningful volume contributions from the newly acquired assets starting from the third quarter of FY27.
Debt and Operational Risks
Dalmia Bharat’s net debt-to-EBITDA ratio has increased to 1.47x following the debt-financed acquisition. While this is an increase, it remains within the management’s comfort threshold of 2.0x. A key challenge for the company will be the successful integration of the Jaiprakash Associates cement assets to match its existing operational efficiency. The brokerage anticipates that achieving the targeted EBITDA per ton from these new units will be a crucial factor for the company's valuation.
Investors should closely track the progress of these asset integrations, as management has projected that the new facilities could reach profitability levels similar to the company's core operations within seven to eight quarters. Additionally, any changes in raw material pricing or cement demand trends in its key markets across the South, East, and Central regions will be important monitorables for the company's profitability in the coming periods.