Dalmia Bharat reported a robust Q1 FY27 performance with EBITDA reaching ₹800 crore, significantly outperforming market estimates. While higher volumes and better pricing drove recent results, the company faces potential margin pressure from rising operating costs in the upcoming quarters.
Detailed Coverage
Dalmia Bharat has reported a strong start to the current financial year, with its June quarter performance exceeding expectations from analysts. The cement manufacturer posted an EBITDA of ₹800 crore for Q1 FY27, which surpassed market forecasts by nearly 9% to 19%. This growth was primarily fueled by a 9% year-on-year increase in sales volumes and a 6% quarter-on-quarter improvement in blended realisations, which is the average selling price per tonne of cement.
Operational Performance and Cost Factors
The company’s ability to improve its operating profitability per tonne was a standout feature this quarter. Dalmia Bharat recorded an EBITDA of ₹1,059 per tonne, marking a ₹34 per tonne increase compared to the previous quarter. This performance was notable as it defied initial expectations of a decline in per-tonne profitability. Efficient management of operating costs helped the company maintain its margins despite the volatile input price environment.
Future Outlook and Margin Risks
Investors may look toward the September quarter, which is seasonally weaker for the cement industry due to the monsoon season affecting construction activity. There are clear indications of potential pressure on profit margins. The company has guided for an increase in operating costs of ₹70 to ₹75 per tonne, largely due to supply chain complexities and rising logistics expenses linked to geopolitical tensions in West Asia. Some analysts suggest that actual cost increases could be even higher, potentially reaching ₹118 per tonne, which would exert downward pressure on the EBITDA per tonne in the coming months.
Strategic Expansion in Central India
The company is currently integrating its recently acquired assets in central India. These acquisitions are viewed as a long-term strategic advantage that will help the company grow its sales volumes and market presence. However, the initial phase of integrating these units often brings elevated operational costs, which may temporarily impact overall margins. While volume growth estimates for FY27 and FY28 have been revised upwards by 3%, EBITDA projections for FY28 and FY29 have seen minor downward adjustments of 1% and 5%, respectively, reflecting the anticipated cost headwinds during this ramp-up phase.
Moving forward, the primary monitorables for shareholders will be the pace at which the central India capacity is utilized, the company's ability to pass on rising fuel and logistics costs to customers, and the actual trend in operating costs as the year progresses.