Shares of cement maker Dalmia Bharat Ltd were up from last trading sessions. On September 10, the company completed the long-awaited acquisition of Murli Industries from the National Company Law Tribunal. Continuing its bullish movement, the stock rose more than 5% intraday for ₹771.60 on the NSE Tuesday.
With this, Dalmia Bharat is on track to meet its capacity target of 37 mtpa and become the third largest in India by FY 2022, analysts said. Murli Industries has an integrated capacity of 3 million tons per year (mtpa) with a factory located in Chandrapur district in Maharashtra. Thus, give Dalmia Bharat access to three other states of Telangana, Madhya Pradesh and Chhattisgarh.
“With access to 20 states, it is gradually moving from the stature of a regional player. Dalmia would spend ₹2500 crore in FY2021-22E towards expansion. Strong operating cash flow would continue to generate strong free cash flow and reduce net debt by ₹2900 crore in FY2020 to ₹1700 crore in FY2022E. In the absence of new projects, it would become debt free (level of net debt) by FY2023E, ”analysts at Kotak Institutional Equities said in a September 14 report.
Dalmia Bharat has been expanding rapidly, via organic and inorganic routes, for the past few years. With this, Dalmia Bharat continues to consolidate its position in the East and increase its presence in the West. In the near term, given the already crowded eastern region, analysts warn of some pressure on the company’s achievements, unless demand improves significantly.
Meanwhile, according to analysts’ estimates, the stock is trading at a one-year Ev / Ebitda ahead of 5 times. Ev stands for enterprise value. Ebitda is short for earnings before interest, taxes, depreciation and amortization. The stock’s valuation multiple is expected to gradually improve, largely thanks to deleveraging, analysts said.