Dalmia Bharat Enterprises

Transcription

1 Result Update Dalmia Bharat Enterprises 1 November 218 Reuters: DALA.BO; Bloomberg: DBEL IN Performance In Line; Stock Under Review Post Odisha Cement Amalgamation Dalmia Bharat Enterprises (DBEL) reported performance in line with expectation backed by YoY double-digit volume growth. Volume grew ~13.5% YoY to 4.13mnmt (in line with our estimate of 4.8mnmt), contributed by its key markets. Realisation gains (unadjusted to incentive income), grew ~6% YoY to Rs5,225/tn which was offset by higher- than-estimated cost over-run of ~12% at Rs4,283/tn. Overall revenues grew ~17% YoY to ~Rs21.6bn. Higher operating costs was because of higher energy costs (combined with raw material costs to neutralise the inventory impact) that increased ~16% to Rs2,44/tn. Other expenditure jumped 34% YoY to Rs3.68bn and effectively, EBITDA declined ~11% YoY to Rs3.89bn versus ~Rs4.4bn in (marginally below our estimate of ~Rs4.5bn). EBITDA/tn fell 19% to Rs915/tn compared with Rs1,13/tn as cost inflation offset the benefit of realisation gains and hurt the performance. Following the amalgamation of DBEL and Odisha Cement, higher interest costs and depreciation are not comparable with. Effectively, DBEL incurred a loss of 65mn before tax. Positive tax impact helped the company to post a marginal increase in PAT at Rs2mn. We have put the DBEL stock under review from our Sell rating earlier following amalgamation of the two companies. We will revisit our earnings estimates after taking into account the impact of the amalgamation and come out with our revised rating (if it is changed) and a fresh target price on DBEL. Higher volume growth: Volume was up ~14% YoY at 4.13mnmt (~3.64mnmt in ) on account of good demand in the eastern region and revival in the southern region. Realisation unadjusted to the incentives (Rs4mn in ) increased by ~6% YoY to Rs5,225/tn. Cost inflation offsets realisation gains: Energy costs (combined with raw material costs) rose ~16% YoY (energy costs up 24% YoY) on account of high pet-coke prices. The overall pet-coke usage was 57% in. Energy cost inflation continued, despite the shift in fuel mix to domestic fuel/lignite. Other expenditure shot up sharply by ~35% to Rs3.68bn YoY. Logistics costs were up ~7 YoY at Rs949/tn because of higher diesel prices. Effectively, overall operating costs rose 11.5% YoY/~5. QoQ to Rs4,283/tn. Ratings and estimates under review: We have placed the DBEL stock under review from our Sell rating earlier following the amalgamation of Odisha Cement with DBEL. We will revisit our earnings estimates after taking into account the impact of the amalgamation and come out with a revised rating (if it is changed) and a fresh target price on DBEL shortly. UNDER REVIEW Sector: Cement CMP: Rs2,9 Milind Raginwar Research Analyst milind.raginwar@nirmalbang.com Key Data Current Shares O/S (mn) 89.2 Mkt Cap (Rsbn/US$bn) 187.8/ Wk H / L (Rs) 3,35/1,923 Daily Vol. (3M NSE Avg.) 9,816 Price Performance (%) 1 M 6 M 1 Yr Dalmia Bharat (9.2) (3.9) (29.6) Nifty Index (5.1) (3.4).4 Source: Bloomberg Y/E March (Rsmn) YoY % QoQ % Net sales 21,58 18, ,676 (8.9) Operating expenses 17,69. 13, ,436.3 (4.) EBITDA 3,89 4,351 (.6) 5,24 (25.8) EBITDA margin (%) (57bps) 22 (4bps) Other income (19.7) Interest costs* 2,25 1, , Depreciation* 3,3 1, , PBT* (65) 1,814 (135.8) 2,254 (128.8) Non-recurring items.. PBT (after non-recurring items)* (65) 1,814 (135.8) 2,254 (128.8) Tax* (67) 584 (214.7) 773 (186.6) Reported PAT* 2 1,23 (98.4) 1,481 (98.6) Adjusted PAT* 2 1,37 (98.1) 1,243 (98.4) NPM (%) (556bps) 5.2 (516bps) Adjusted EPS* (Rs) (98.1) 14. (98.4) Source: Company, Nirmal Bang Research * Not comparable with / due to amalgamation impact

2 Exhibit 1: Operational details (Rs) YoY % QoQ % E Deviation % Volume (mnmt) (8.4) Cement realisation (net of freight) (Rs/mt) 5,225 4, , , Operating costs (Rs/mt) 4,283 3, , , EBITDA (Rs/mt) 915 1,13 (19.1) 1,135 (19.4) 994 (7.9) Source: Company, Nirmal Bang Research Exhibit 2: Detailed quarterly financials (Rsmn) YoY % QoQ % E Deviation % Net sales 21,58 18, ,676 (8.9) 2, Expenditure Change in stock (68) (119) 47.5 (218) (359) 89.4 Clinker purchases (18.6) Raw material costs 4,5 3, , , Power & fuel expenses 4,29 3, , , Freight costs 3,92 3, ,651 (15.7) 4,44 (3.1) Employee costs 1,65 1, ,682 (1.9) 1,75 (5.7) Other expenses 3,68 2, ,74 (1.6) 3, Total operating expenses 17,69 13, ,436 (4.) 16, EBITDA 3,89 4,351 (.6) 5,24 (25.8) 4,51 (4.) EBITDA margin (%) (57bps) 22.1 (4bps) 19.4 (137bps) Other income (19.7) (13.5) Interest costs* 2,25 1, , , Depreciation* 3,3 1, , , PBT* (65) 1,814 (135.8) 2,254 (129) 1,58 (143.1) Non-recurring items PBT (after non-recurring items)* (65) 1,814.4 (135.8) 2,254.3 (129) 1,58. (143.1) Tax* (67) 584. (214.7) (187) (289.1) Reported PAT* 2. 1,23.4 (98.4) 1,48.9 (99) 1,153.6 (98.3) Adjusted PAT* 2. 1,37.3 (98.1) 1,242.5 (98) 1,13.6 (98.) NPM (%)* (556bps) 5.2 (516bps) 4.9 (476bps) Adjusted EPS (Rs)* (98.1) 14. (98) 11.4 (98.) Research * Not comparable with / because of amalgamation impact Source: Company, Nirmal Bang Exhibit 3: Trend in operating costs/mt Operating costs/mt(rs) 2QFY17 YoY % QoQ % Consumption of raw materials , , Power and fuel expenses , Freight costs ,29 1, (8.) Total costs per mt 3,777 3,73 3,587 3,765 3,842 3,943 3,956 4,88 4, Source: Company, Nirmal Bang Research 2 Dalmia Bharat Enterprises

3 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 Exhibit 4: Volume growth continues backed by strong demand in key markets (Rsmn) 5.2 (%) () (1.) (2) Exhibit 5: Realisation (unadjusted to incentive income) gains YoY 5,4 15 5,2 5, 4,8 4,6 4,4 4,2 4, 5 (5) () (15) Volumes (mn mt) Realisations (Rs/mt) Source: Company, Nirmal Bang Research Exhibit 6: EBITDA/tn falls as high cost offsets realisation gains Exhibit 7: Overall cost escalation continues impacting EBITDAM (Rsmn) 1,5 1,3 1, ,112 1,145 1,333 1,13 1,57 1,137 1, , ,2 4, 8 6 3, ,6 3,4 (2) (4) 3,2 (6) EBITDA/mt Operating costs/mt (Rs) Source: Company, Nirmal Bang Research Exhibit 8: Freight cost inflation limited 1, , (2) Source: Company, Nirmal Bang Research Exhibit 9: Higher pet-coke prices impact energy costs 1,2 6 1, () Freight costs/mt (Rs) Power & Fuel costs/mt (Rs) Source: Company, Nirmal Bang Research Source: Company, Nirmal Bang Research 3 Dalmia Bharat Enterprises

4 Apr-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Oct-18 Financials snapshot pre-amalgamation (Financials Under Review post-amalgamation) Y/E Mar (Rsmn) FY16 FY17 FY18P FY19E FY2E Net sales 64,38 74,44 86,792 98,54 5,762 EBITDA margin (%) Adjusted net profit 1,98 2,937 5,498 7,75 8,31 vs consensus (%) (23.1) (33.3) EPS (Rs) growth (%) 1, P/E (x) P/B (x) EV/EBITDA (x) D/E(x) RoE (%) RoCE (%) Source: Company, Nirmal Bang Research Rating track Date Rating Market price (Rs) Target price (Rs) 26 March 218 Sell 2, 847 2, May 218 Sell 2,737 2,592 6 June 218 Sell 2,624 2,43 14 August 218 Sell 2,55 2,395 1 November 218 UNDER REVIEW 2,9 - Rating track graph Not Covered Covered 4 Dalmia Bharat Enterprises

5 DISCLOSURES This Report is published by Nirmal Bang Equities Private Limited (hereinafter referred to as NBEPL ) for private circulation. NBEPL is a registered Research Analyst under SEBI (Research Analyst) Regulations, 214 having Registration no. INH1436. NBEPL is also a registered Stock Broker with National Stock Exchange of India Limited and BSE Limited in cash and derivatives segments. NBEPL has other business divisions with independent research teams separated by Chinese walls, and therefore may, at times, have different or contrary views on stocks and markets. NBEPL or its associates have not been debarred / suspended by SEBI or any other regulatory authority for accessing / dealing in securities Market. NBEPL, its associates or analyst or his relatives do not hold any financial interest in the subject company. NBEPL or its associates or Analyst do not have any conflict or material conflict of interest at the time of publication of the research report with the subject company. NBEPL or its associates or Analyst or his relatives do not hold beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of this research report. NBEPL or its associates / analyst has not received any compensation / managed or co-managed public offering of securities of the company covered by Analyst during the past twelve months. NBEPL or its associates have not received any compensation or other benefits from the company covered by Analyst or third party in connection with the research report. Analyst has not served as an officer, director or employee of Subject Company and NBEPL / analyst has not been engaged in market making activity of the subject company. Analyst Certification: Mr. Milind Raginwar, the Research Analyst are the author of this report, hereby certify that the views expressed in this research report accurately reflects my/our personal views about the subject securities, issuers, products, sectors or industries. It is also certified that no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst(s) principally responsible for the preparation of this research report and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. 5 Dalmia Bharat Enterprises

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