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Stock Outlook & Returns
The CMP of the DBL is Rs 1,717.85 apiece. The 52 week low of the stock is Rs 1,212.50 and the 52-week high is Rs 2,259, respectively. The stock over the past 1 week has given a 3.47% positive return and in the past 1 month, gave a 6.3% positive return, respectively. In the past 3 months, it has given 37.06% positive return. It has given a 22.67% negative return over a year, respectively. Whereas, in the past 3 years, it gave 116.59% multibagger return.
Strong topline growth aided by volumes
DBL reported revenue growth of 28%YoY aided by 27%YoY growth in volumes while realization was flat on YoY. DBL has commercialized 2.9MT Murli plant in Maharashtra (acquisition) in Jan 2022 and expects to stabilize in next 1-2 quarters. The ongoing capacity expansion and the ramp up in acquisitions will support future volume growth. We factor a revenue growth of ~15% CAGR over FY22E-24E, supported by capacity expansion and ramp up in recent acquisitions.
Input prices started to ease, margins to improve from H2FY23
EBITDA de-grew by 16%YoY as EBITDA margin declined to 18% from 27%YoY (20%QoQ), due to steep surge in fuel prices. EBITDA/Ton declined to Rs. 945 Vs Rs. 1,431 YoY (Rs.1,035 QoQ). On a per ton basis, Power & Fuel cost increased by 45% YoY due to sharp increase in pet coke/coal prices. Average cost of fuel increased to $ 218/ton (Vs $181 QoQ / $141in FY22 / $78 in FY21) but started to ease from the peak levels (currently at $190) which is expected to benefit from Q3FY23 onwards. To reduce cost, the company is focusing on increasing the green power mix and has added 41.4MW (5.4MW Waste Heat Recovery-WHR + 36MW solar) in Q1FY23 and is adding 67.9MW (35.4MW WHRS + 32.5MW solar) by the end of FY23. Total WHR/Solar capacity would be 72MW/101MW by FY23E Vs 31MW/32MW in FY21. The ramp up in the new clinker capacity also helps to reduce raw material cost (cost advantage of ~Rs.70-75 per ton of clinker). Expect EBITDA/Ton to decline in FY23 due to current margin pressure but will improve to ~Rs.1,140 in FY24E. Any adverse movements in cement, fuel and RM prices are the key risks.
Valuation & Outlook
DBL’s strong capacity expansion plans (~48MT by FY24E and a long-term target of ~110-130MT by FY31) while maintaining a strong balance sheet should support rerating in valuation. Demand outlook is positive given GoI’s strong focus on infra & housing. The stock currently trades at 1Yr Fwd EV/EBITDA of ~12x. “We value DBL at 11x FY24E EV/EBITDA to arrive at a revised Target of Rs. 1,950 (Rs. 1,620 earlier), maintain Accumulate rating considering short-term pressure on margins,” the brokerage has said.
Disclaimer
The stock has been picked from the brokerage report of Geojit. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.
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