Weak cement prices steal Dalmia Bharat's thunder
cement prices lately in eastern and southern regions. While prices have dropped across markets, the excess capacity in these two regions has meant a sharper drop vis-à-vis all-India average. Given Dalmia’s significant exposure in these regions, muted price trends have raised concerns about its realisation and profitability outlook.
This has resulted in earnings downgrades. Motilal Oswal Financial Services has trimmed the company's Ebitda estimates for FY24, FY25 and FY26 by 4%, 8% and 8%, respectively due to weak pricing. Interestingly, the subdued price trajectory has overshadowed a slew of positives that may aid Dalmia’s long-term growth.
For instance, its organic expansion plans are on track. It will add clinker and cement capacities of 4.9 million tonne per annum (mtpa) each through a mix of greenfield and brownfield expansions by FY25. The company plans to raise cement capacity to around 49.5 mt in FY26 from 44.6 mt now.
Its long-term capacity target is reaching 75 mtpa and 110-130 mtpa by FY27 and FY31, respectively. To reduce the concentration risk, Dalmia is diversifying into newer regions. Currently, it has a vast presence in east and south India and intends to expand to west, central, and north.
Timely capacity additions are critical amid ongoing stiff competition and focus of listed cement makers on market share gains. Despite its robust expansion drive, leverage has remained low. The management has indicated that its growth plans will be in line with demand trends across its operating regions.
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