Sharekhan’s recommendation to buy Dalmia Bharat with a target price of Rs. 2830, as outlined in their research report dated September 13, 2023.
Dalmia Bharat: Cementing Success
Sharekhan has expressed a bullish outlook on Dalmia Bharat, particularly in the context of the cement industry.
Key Factors Driving the Buy Rating:
- Cement Price Hikes: Dalmia Bharat has implemented significant cement price hikes in the Eastern region, with an increase of Rs. 70 per bag in two tranches during September. This has resulted in multi-year high prices for the region. Further price hikes of Rs. 20 per bag are expected in some states in the East, possibly by September 17th and the end of the month. These price hikes contribute to positive revenue prospects for the company.
- Demand Resurgence: The demand environment for cement witnessed a revival in August and is expected to continue its strength in September. This resurgence in demand bodes well for Dalmia Bharat’s business.
- Volume Growth: Dalmia Bharat is targeting a substantial year-on-year volume growth of 15-17% for FY2024, indicating a strong focus on expanding its market share.
- Capacity Expansion: The company plans to add 4.9 million metric tonnes per annum (MTPA) of capacity in South India, aiming to reach a total of 46.6 MTPA by the end of FY2024. This capacity expansion reflects its commitment to growth and market leadership.
- JP Assets’ Acquisition: While the acquisition of JP Assets has faced delays, it is now expected to be completed by the end of FY2024. This acquisition is significant for Dalmia Bharat’s expansion and consolidation plans.
Sharekhan’s Recommendation:
In view of these positive factors and their revised estimates, Sharekhan upgrades Dalmia Bharat to a “Buy” rating. They have set a revised price target (PT) of Rs. 2830 per share. This adjustment is based on upwardly revised estimates and a valuation that takes into account earnings expectations up to September 2025.
In summary, Sharekhan’s optimistic stance on Dalmia Bharat is rooted in the company’s ability to implement cement price hikes, a resurgence in demand, ambitious volume growth targets, capacity expansion plans, and the pending acquisition of JP Assets. These factors have led to a “Buy” rating with a target price of Rs. 2830.
(Note: This stock was also recommended by Motilal Oswal on 28th August 2023 for a Target of Rs.2400.00).
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