Review of Dalmia Bharat, Mahindra & Mahindra Financial Services results | Tech US News

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Dalmia Bharat (NS:): We maintain our Buy rating on Dalmia Bharat (DALBHARA), with an unchanged TP of INR 2,145/sh (13x its Sep-24E consolidated EBITDA). We continue to like Dalbhara for its strong volume and margin outlook as well as balance sheet prudence. Dalmia reported healthy volume growth (+13% YoY). However, margins contracted through continued cost inflation and subpar costs. Unitary EBITDA came in at INR 656 per MT (down 46/30% YoY/QoQ). Increase in blend ratio and greater use of green power/fuel reduced cost inflation. The company has guided that fuel costs will decrease by 10% in Q3.

Mahindra and Mahindra (NS:) Financial Services Ltd (NS:): MMFS’s adjusted earnings were ~11% ahead of our estimate due to an impressive turnaround in asset quality. The stressed pool (GS-II + GS-III) declined further to 16.4% (Q1FY22 peak: 34.8%), led by relentless collection and recovery efforts and improving economic activity. happened According to management, the gap between GNPA (IRAC criteria) and GS-III (IND-AS) has narrowed to INR9bn (1.2% advance) and calls for limited additional provision. MMFS continued strong business momentum with +83% YoY growth driving 16% YoY loan growth. While asset quality and balance sheet growth results were strong, MMFS witnessed further NIM compression and higher opex intensity on the back of rising cost of funds and its three-year journey towards product/customer diversification. What did We are skeptical about the company’s ability to deliver growth, profitability and asset quality results simultaneously in this time frame. We tweak our FY23/FY24E earnings estimates to factor in lower credit costs and maintain ADD with a revised SOTP-based TP of INR224 (previously INR225), implying 1.5x Sep-24 ABVPS. is

Dalmia Bharat

lifting a healthy weight; Cost pressure drags down margins.

We maintain our Buy rating on Dalmia Bharat (DALBHARA), with an unchanged TP of INR 2,145/sh (13x its Sep-24E consolidated EBITDA). We continue to like Dalbhara for its strong volume and margin outlook as well as balance sheet prudence. Dalmia reported healthy volume growth (+13% YoY). However, margins contracted through continued cost inflation and subpar costs. Unitary EBITDA came in at INR 656 per MT (down 46/30% YoY/QoQ). Increase in blend ratio and greater use of green power/fuel reduced cost inflation. The company has guided that fuel costs will decrease by 10% in Q3.

Q2FY23 Performance: Strong volume growth of 13% YoY (-7% QoQ) on capacity additions. Utilization stood at 63% vs. 66/67% YoY/QoQ. NSR fell 3% QoQ (seasonal price decline). Opex increased 16.2% YoY/QoQ on higher unit input costs (INR 100/MT QoQ: higher blending and fuel costs) and other costs. Thus, consolidated EBITDA contracted by 30/46% QoQ/YoY to INR 656 per MT. While consolidated revenues grew 15% YoY on healthy volume growth, EBITDA/APAT fell 39/74% YoY on rapid cost inflation.

H1FY23: Consolidated EBITDA fell 28% YoY to INR 9.7bn led by OCF falling 46% to INR 4.1bn. Capex is picking up pace, up 55% YoY in H1FY23 (up 16% vs H2FY22) to INR 11.6bn. Gross debt rose 6% (vs. Mar-22) to INR 34bn but is comfortable.

CAPEX & OUTLOOK: DALBHARA spent INR 12bn in CAPEX in H1FY23 and guides CAPEX of INR 30bn/INR 35-40bn for FY23/FY24E, towards expansion to 49mn MT by FY24E. It plans to reach a cement capacity of 70-75mn MT by FY27E. The company is increasing its WHRS/solar power capacity to 72/101MW as on March 23 vs. 31/32MW as on March 22. It further plans to add 155 MW of renewables in FY24, taking its green power share to 36 percent, from 24 percent currently. Dalbhara is also increasing its blended cement sales. This will help in margin rebound and also reduce its carbon footprint (already the lowest specific CO2 emission rate in the Indian cement industry). The company has guided that its fuel costs will come down by 10% in Q3FY23. We maintain our FY23/24/25E EBITDA estimates.

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