3 June 2013
4QFY13 Results Update |
Sector: Cement
Dalmia Bharat
BSE Sensex
19,546
Bloomberg
Equity Shares (m)
M.Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
S&P CNX
5,919
DBEL IN
81.2
10.9/0.2
204/92
7/-9/11
CMP: INR134
TP: INR293
Buy
Valuation summary (INR b)
Y/E March
Sales
EBITDA
NP
Adj EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
EV/Ton (USD)
5.5
0.4
4.8
53
4.9
0.3
3.4
38
3.6
0.3
3.1
37
2013 2014E 2015E
27.5
5.9
2.0
24.3
19.4
6.6
9.2
13.5
33.2
7.4
2.2
27.1
11.6
7.0
8.5
23.0
39.8
9.6
3.0
37.2
37.5
8.9
10.2
16.1
377.8 400.2 432.5
4QFY13 numbers are not comparable YoY & QoQ as financials are consolidated
for its recently acquired Calcom and Adhunik in 3QFY13 onward. Not adjusting
for the same, net sales grew by 15.8%YoY (+13% QoQ) to INR7.6b.
Cement volumes grew +12%YoY (+13% QoQ) to 1.68MT (including 0.24 MT
from north east operations). Volume from core southern operations was
down by 4%YoY (+10.4%QoQ) to INR1.44 MT. Blended cement realizations
was flat QoQ (+2.4%YoY) to INR4,422/ton. Adjusted for other businesses pure
cement realization stood at INR4,370/ton (+INR79/ton QoQ).
EBITDA de-grew by 5%YoY (+2%QoQ) to INR1.3b, while EBITDA margins
declined by 1.9pp QoQ (-3.7pp YoY) to 17%. Blended EBITDA/ton stood at
INR774 (-INR84/ton QoQ and -INR64/ton YoY), impacted by consolidation of
north east plants with weak profitability, higher freight costs, higher branding
spent for 'Dalmia' brand launch in North East and limited operating leverage.
PAT stood at INR371m (+3.5x YoY and +2x QoQ) as an impact of consolidation
of north east capacities and sequentially higher other income.
Ongoing expansion projects are progressing broadly on schedule with (1)
2.5MT Karnataka plant to be commissioned by 1QFY15, (2) 0.8mt Calcom plant
to be operational by 1QFY15 and (3) 1.35MT OCL Medinipur plant to be
commissioned by FY14-end.
We are revising our estimates for FY14/FY15 by -10%/+7% to INR27/INR37 to
factor in change in assumptions for realizations increase of INR6.5/bag in
FY14 (v/s INR13.5/bag earlier) and increase of INR15/bag in FY15 (v/s INR12.5/
bag earlier). DBEL trades at attractive valuations of USD37/ton for 15mtpa of
pro-rata capacity (~22mtpa capacity under control) and 3.1x FY15EBITDA.
Maintain
Buy
with target price of INR293 (FY15 SOTP based).
Jinesh Gandhi
(Jinesh@MotilalOswal.com) + 91 22 3982 5416
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com); +9122 3982 5436
Investors are advised to refer through disclosures made at the end of the Research Report.
1

Dalmia Bharat
South volume de-grew 4% YoY, realizations stable QoQ
4QFY13 numbers are not comparable YoY (comparable QoQ) as Dalmia has
consolidated the financials of its recently acquired north east ventures Calcom
and Adhunik in 3QFY13 onward. Not adjusting for the same, net sales grew by
15.8%YoY (+13% QoQ) to INR7.6b.
Cement volumes grew +12%YoY (+13% QoQ) to 1.68MT (including 0.24 MT from
north east operations). Volume from core southern operations was down by 4%YoY
(+10.4%QoQ) to INR1.44 MT.
Blended cement realizations was flat QoQ (+2.4%YoY) to INR4,422/ton. Adjusted
for other businesses pure cement realization stood at INR4,370/ton (+INR79/ton
QoQ).
Operations in north east are ramping up with exit market share in Mar-13 improved
to 22% (from 10% in Mar-12). It has launched Dalmia brand in this new market and
established pricing premium.
Trend in volumes
Blended realizations flat QoQ
Source: Company, MOSL
Stable realizations, high freight cost and brand spending dent profitability
EBITDA de-grew by 5%YoY (+2%QoQ) to INR1.3b, while EBITDA margins declined
by 1.9pp QoQ (-3.7pp YoY) to 17%.
Blended EBITDA/ton stood at INR774 (-INR84/ton QoQ and -INR64/ton YoY). Cement
EBITDA/ton at south operations stood at largely flattish QoQ.
Adhunik and Calcom have accounted for INR480m/-INR80m of EBITDA in 4QFY13.
The management expects Calcom to break-even at EBITDA level in FY14, net profit
level in FY15 post expansion of clinker capacity.
YoY decline in profitability is partially attributable to consolidation of north east
plants with weak profitability during ongoing stabilization process and poor
utilizations.
Other cost factors sequentially impacting profitability are (1) higher freight costs,
and (2) limited operating leverage, and (3) spending of brand establishment in
north east region.
PAT stood at INR371m (+3.5x YoY and +2x QoQ) as an impact of consolidation of
north east capacities, sequentially higher other income and lower interest expense
due to capitalization of capex loan.
Dalmia has re-financed ~INR10b of its north east loan at ~300bp lower cost of debt
-which is expected to reduce interest expense meaningfully FY14 onward. We are
yet to model in for the same.
2
4 June 2013

Dalmia Bharat
Trend in EBITDA
Trend in cement EBITDA (INR/ton)
Source: Company, MOSL
Revising estimates
We are adjusting our estimates to factor in change in assumptions for realizations:
(1) YoY increase of INR6.5/bag in FY14 (v/s INR13.5/bag earlier) and (2) YoY increase
of INR15/bag in FY15 (v/s INR12.5/bag earlier)
These translate into downgrade in target price to INR285.
Revised forecast (INR m)
Rev
7.0
33,221
7,392
2,200
27.1
FY14E
Old
7.4
36,228
7,897
2,437
30.0
Chg (%)
-5.6
-8.3
-6.4
-10
-9.7
Rev
7.9
39,824
9,634
3,024
37.2
FY15E
Old
8.2
42,051
9,541
2,824
34.8
Chg (%)
-3.8
-5.3
1.0
7.1
7.1
Source: MOSL
Volumes (mt)
Net Sales
EBITDA
Net Profit
EPS
Valuation and view
Dalmia Bharat (DBEL) is poised for strong scale-up, driven by sustained focus on
capacity and market expansion through both organic and inorganic routes.
DBEL to post 14%+ volume CAGR (FY13-15) on the back of (1) new expansion, (2)
demand recovery in southern states, and (3) uptick in utilization in North East
capacity.
DBEL's net debt stood at ~INR26b. The spiraling debt on the back of expansions
and acquisitions may concern over near-term, but we expect the de-leveraging to
trigger post completion of majority of its capex in FY15, coupled with steady uptick
in capital efficiencies.
DBEL trades at attractive valuations of USD37/ton for 15mtpa of pro-rata capacity
(~22mtpa capacity under control) and 3.1x FY15EBITDA. Maintain
Buy
with target
price of INR293 (FY15 SOTP based).
4 June 2013
3

Dalmia Bharat
DBEL: Sum of the Parts valuations
INR m
DBCL
OCL (@ 40% HoldCo discount)
Adhunik
Calcom
Total EV
Less: Pro-rata Net Debt (adj for CWIP)
Total Equity Value
Fair value (INR/share)
Upside (%)
Implied EV/Ton (on pro-rata capacity)
Valuation method
EV/EBITDA (x)
EV/EBITDA (x)
EV/Ton
EV/Ton
Multiple
4
4
100
100
FY14E
FY15E
20,293
24,582
4,007
4,869
7,204
7,204
4,599
7,738
36,103
44,393
15,917
20,622
20,185
23,771
249
293
85.4
118.3
52
52
Source: Company, MOSL
4 June 2013
4

Dalmia Bharat
Dalmia Bharat: an investment profile
Company description
DBEL is a holding company (85% stake) for in Dalmia
Cement Bharat (DCBL) - a SPV owning all cement assets,
with Kohlberg Kravis Roberts (KKR) holding the balance
15%. DCBL has cement capacity of 9mtpa in Tamil Nadu
and Andhra Pradesh. DCBL also holds 45.37% stake in
OCL India (5.4mtpa capacity in Orissa), 100% stake in
Adhunik Cement (1.5mt capacity in Meghalaya) and 76%
stake in Calcom (1.3mt capacity in Assam). ? DBEL holds
effective stake of 96.1% in DCB Power Venture, which
has thermal power generation capacity of 72MW.
The spiraling debt on the back of expansions and
acquisitions may concern over near-term
Sector view
Unusual price weakness of 4QFY13 is expected to
prevail in 1HFY14, as demand is expected to pick-up
only post monsoon.
Structural increase in cost base (both capex and opex)
would necessitate higher cement prices.
Revival in cement demand would be key catalyst for
the stock performance.
Key investment argument
Capacity expansion to drive superior volume growth
Diversifying market mix - not merely South-
centered
Superior profitability to sustain; balance sheet
strength offers comfort
Recent development
Operations in north east are ramping up with exit
market share in Mar-13 improved to 22% (from 10%
in Mar-12). It has launched Dalmia brand in this new
market and established pricing premium.
Valuation and view
DBEL trades at attractive valuations of USD37/ton for
15mtpa of pro-rata capacity (~22mtpa capacity under
control) and 3.1x FY15EBITDA.
Maintain
Buy
with target price of INR293 (FY15 SOTP
based).
Key investment risks
Concentrated in Southern India which has very
adverse demand-supply equilibrium.
Higher dependence on imported coal makes it
vulnerable to volatile imported coal and forex rates.
Comparative valuations
Dalmia
Bharat
6.2
5.2
0.4
0.3
40
40
4.2
4.0
Madras
Cements
11.0
7.9
1.9
1.6
93
82
6.4
4.6
Shree
Cement
18.1
12.9
3.9
3.1
128
121
9.1
7.2
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
27.1
37.2
Consensus
Forecast
37.1
38.4
Variation
(%)
-26.9
-3.2
P/E (x)
FY14E
FY15E
P/BV (x)
FY14E
FY15E
EV/Ton ($)
FY14E
FY15E
EV/EBITDA (x) FY14E
FY15E
FY14
FY15
Target price and recommendation
Current
Price (INR)
134
Target
Price (INR)
293
Upside
(%)
118.3
Reco.
Buy
Stock performance (1 year)
Shareholding pattern (%)
Mar-13
Promoter
Domestic Inst
Foreign
Others
4 June 2013
63.0
3.3
14.4
19.4
Dec-12
63.0
3.4
14.4
19.3
Mar-12
59.2
3.3
17.2
20.4
5

Dalmia Bharat
Financials and Valuation
4 June 2013
6

Dalmia Bharat
N O T E S
4 June 2013
7

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Dalmia Bharat
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