Dalmia Bharat

Investment case

Value: south/east capacity at half the EV/t

Why this business

India's fourth-largest cement group by capacity with 54.7 mtpa at Jun-2026 (after adding 5.2 mtpa of Jaiprakash/JP central-India assets at Chunar, Rewa and Sadwa for Rs 2,850 cr), historically concentrated in the South and East (Tamil Nadu, Andhra/Telangana, Odisha, West Bengal, Bihar, North-East) and now expanding into Central and West India. Sells ~30 mt a year (Q1FY27 volume 7.6 mt) with a 25% premium-product mix in trade; targets ~67 mtpa by FY28 and 110-130 mtpa by FY31.

What we believe

1. 01Cheapest replacement-cost play among large-caps: market cap of ~Rs 32,000 cr plus net debt of Rs 4,431 cr gives an EV of ~Rs 36,500 cr on 54.7 mtpa, i.e. ~Rs 670 cr (~$78) per mtpa, versus the ~$100+/t cost of new greenfield capacity and the Rs 548/t (~Rs 2,850 cr for 5.2 mtpa) Dalmia itself paid for the JP assets (management: near replacement cost).
2. 02Capacity growth of ~22% to 66.7 mtpa by FY28 is largely funded and under construction: Belgaum 3 mtpa 78% complete (Q4FY27), Kadapa 6 mtpa (Q3FY28), Pune 3 mtpa (Q2FY28), with FY27 capex of Rs 3,200-3,400 cr and leverage of 1.47x net debt/EBITDA kept below the 2x ceiling.
3. 03Margin recovery: FY26 EBITDA rose 28% to Rs 3,083 cr (OPM 21% vs 17%) and PAT rose 66% to Rs 1,157 cr; Q1FY27 EBITDA/tonne of Rs 1,055 is above ICRA's FY27 industry estimate of Rs 880-930/t, and cost-saving programme targets Rs 150-200/t (Rs 45-50/t achieved).
4. 04South-India pricing is improving - management cited Rs 10-15/bag hikes in the South in Q1FY27 and industry-wide 6-7% increases in South/East in April 2026 - the regions where Dalmia has its highest share.
5. 05Value construct: at 1.8x book with 55.8% promoter holding and a 20% dividend payout, downside is cushioned relative to Shree (52x P/E) and Ramco (108x P/E) if the FY28 capacity ramp lifts ROE from the current 6%.

Why now

TTM P/E 29.2x and ~1.8x book (Rs 1,713 / BV Rs 959); ~11-12x forward EV/EBITDA per MOFSL (Feb-2026). 5-year average not sourced. EV/EBITDA n.m.; dividend yield 0.5%.

Market disagreement

• Shree Cement: Shree trades at ~52x TTM P/E and ~Rs 84,844 cr market cap with a 7.5% ROE; Dalmia's 29x P/E and lower EV/tonne offer more re-rating room for a similar ROE profile.
• JK Cement: JK Cement has a superior 15.6% ROE but trades at ~40x P/E with Rs 6,183 cr of borrowings; it is a North/Central play with a larger white-cement/putty business - Dalmia is the cheaper South/East asset base.
• Ramco Cements: Ramco is the most direct southern peer but has ROE of 0.4%, ~108x P/E and Rs 3,871 cr of debt on a Rs 20,587 cr market cap; Dalmia has a stronger balance sheet (1.47x net debt/EBITDA) and a diversified East/Central footprint.

Position sizing

Value Mid cap  2.4% of the PMS on $31 Jul 2026 (August rank 18). Satellite positions are owned for an asymmetry, sized up when the cycle rewards risk and reduced when it does not.

Catalysts

• Commissioning of the 3 mtpa Belgaum unit in Q4FY27 (Jan-Mar 2027) - first step to 66.7 mtpa.
• Q2FY27 results (late Oct-2026) showing JP assets' ramp (first shipment 20-Jun-2026) and whether the South price hikes held through the monsoon.
• Any further bolt-on acquisition at or below replacement cost, or a re-rating as leverage stays below 2x through the capex cycle.

Risks and response

• East-India pricing remains depressed (management declined to guide on East prices) and Q2FY27 costs are guided up Rs 70-80/t, so EBITDA/tonne could slip below Rs 1,000 in the monsoon quarter.
• Integration risk: the JP assets need 7-8 quarters to reach Dalmia's normal EBITDA/tonne, and net debt tripled QoQ to Rs 4,431 cr with Rs 3,200-3,400 cr of FY27 capex still to spend.
• Structurally low ROE (6.1% FY26, 5% three-year) and five-year sales CAGR of only 8%; screener flags both; earnings have been downgraded by some brokers to Sell/Hold in early 2026.

Thesis-break conditions

Not stated separately on this page; the risk list carries the monitoring triggers.

Review history

• 8 Sep 2026 · Yash Palod · one-pager in "Why We Own What We Own" (p51) · portfolio as of $31 Jul 2026
• 31 Aug 2026 · Classification in the August top-30: Value

Source: Buoyant_Why_We_Own_What_We_Own_Sep2026.pdf (portfolio as of 31 July 2026), p51. Internal; external publication of these fields is controlled by audience policy.