Shares of cement maker Dalmia Bharat Ltd, which has gained 20 percent so far this year to hit a 52-week high of Rs 2,289 on June 16, settled in the green in Tuesday's (June 20) trade. The scrip closed 0.33 percent higher at Rs 2,249.85 apiece on the NSE. The rally, however, may not be over yet. Investors can look to buy the stock now for a possible target price of Rs 2,550, suggesting an upside potential of 14 percent from the current market levels.
According to Motilal Oswal, Dalmia Bharat, in its FY23 annual report, highlighted the company's long-term expansion plans — grinding capacity of 75 MTPA (million tonnes per annum) or 110-130 MTPA by FY27 or FY31; sustainability initiatives to improve profitability — reduction in clinker factor to 58.5 percent, rise in blended cement mix to 84 percent, increase in thermal substitution rate (TSR) to 17 percent and increase in renewable energy (RE) share to 29 percent (including RE share of grid electricity consumed); initiatives toward logistics optimisation; and maintaining leverage at a comfortable level — net debt-to EBITDA below two times.
Currently, the company has a major presence in eastern and southern India. It intends to establish its presence in western, central and northern India by FY24-end. The management has recently indicated that the company is doing its largest capex ever.
Management outlines future roadmap
The management has outlined its future roadmap, which focuses on expansion through a mix of organic and inorganic routes, a higher share of premium products and RE, and raw material security, Motilal said. Some of its priorities in FY24 include the timely completion of ongoing expansion and the successful integration of JPA cement assets.
With an expected improvement in earnings — 25 percent CAGR (compound annual growth rate) over FY23-25E — and its focus on capacity expansions without leveraging the balance sheet, analysts expect the stock to trade at higher multiples.
The Dalmia Bharat stock opened at Rs 2,235 on Tuesday against the previous close of Rs 2245.10 on NSE. The stock of the cement company has risen 8 percent in the last one month, while it rallied nearly 80 percent in the last one year. Market capitalisation of the firm rose to Rs 41,970 crore on BSE.
In terms of technicals, the 14-day relative strength index (RSI) of the Dalmia Bharat stock stands at 70.9, signalling that it is trading in the overbought zone. The scrip has a one-year beta of 1.2, indicating high volatility. Dalmia Bharat shares are trading higher than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages.
(Edited by : Shoma Bhattacharjee)
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