Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We attended the analyst meet of Dalmia Bharat Enterprise
Ltd (DBEL) and the following are the key takeaways from
the meet:
Financial performance during the quarter: DBEL’s net
sales grew by 37.9% year on year (YoY) to Rs525.1 crore.
The revenue growth was driven by an impressive
growth in volume (up 20.6% YoY) as well as in
realisation (up 12.3% YoY). Further, inspite of an
increase in the cost of production by 4.9% the operating
profit margin (OPM) has expanded by 690bps to 23%.
Hence, revenue growth coupled with margin expansion
has resulted in a robust 125.1% growth at the net profit
level (consolidated).
Volume growth driven by capacity addition and
increase in market share: Inspite of the sluggish
demand environment in the southern region of India,
the company was able to deliver an impressive 20.6%
growth in volume which was driven by capacity
addition and a gain in market share in Tamil Nadu and
Andhra Pradesh (AP). As per the company’s
management, the volume growth in the southern
region was affected primarily due to political hurdles
and also because of a slowdown in the real estate
market. The management expects cement demand to
grow at 6% on an all India basis. However, the
company’s volume growth is expected to be better
than the industry’s average growth. On a year till date
(YTD) basis (April-August 2011) the company has posted
a 23.7% growth in its dispatches.
Supply discipline results in healthy realisation: The
average blended realisation during the quarter has
increased by 12.3% YoY to Rs3,920/tonne. The increase
in realisation is on account of the supply discipline
followed by the cement manufacturers in the southern
region. Further with an increase in the capital cost
for setting up a cement plant and increase in the price
of key inputs, the management believes cement prices
would move northwards and are unlikely to stabilize
at lower levels inspite of lower capacity utilisation
and capacity addition in FY2012 and FY2013
Cost pressure continues to pressure margin: The cost
of production on per tonne basis has increased by 4.9%
YoY to Rs3,284 (on blended basis) on account of a surge
in the cost of power & fuel (as the company sources
most of its coal requirement through imports which
are costly). However, with a sharp increase in cement
realisation, the company was able to post an expansion
in its margin during the quarter. Going ahead the
management believes that the margin may continue
to be volatile on a quarterly basis but on a yearly basis
the realisation will support the margin.
Entering the eastern region: The present cement
capacity of the company is at 9MTPA and it plans to
add another 10MTPA of green field capacity in a phased
manner. In phase 1 the company plans to set up a 2.5-
3mt capacity in the eastern region and the decision
on placing orders is expected by Q3FY2012. During
the quarter, DBEL commenced work for setting up
railway sliding at its AP plant to optimise logistics costs.
Outlook and valuation: Though the company has
managed to deliver a better volume growth, we
maintain our bearish demand outlook in the southern
region given the uncertain political environment.
Further any pick up in the cement offtake could lead
to an increase in the utilisation ratio and cement prices
may come under pressure. In addition to the volume
and realisation parameters, the dependency on
imported coal is also one of the major concerns. At
the current market price the stock is trading at a price
earning (PE) of 7.7x its FY2012E and 5.4x its FY2013E
earnings (based on Bloomberg consensus estimates).
The stock is not under our active coverage and we do
not have any rating on it.
Increased focus due to business restructuring
DBEL was holding all the three businesses (cement, sugar
and power) under one entity. But the management
proposed business restructuring and with the approval of
the shareholders the cement business had been demerged
with effect from April 2010. As per the new structure the
sugar business was kept in the existing entity (renamed
as Dalmia Bharat Sugar and Industries) while the cement
and the power businesses were transferred to the newly
formed DBEL. The business restructuring augurs well for
the company as it will streamline the decision-making
process and increase the efficiency in business processes
through focused management teams.
Valuation
Though the company has managed to deliver a better
volume growth, we maintain our bearish demand outlook
in the southern region given the uncertain political
environment. Further any pick up in the cement offtake
could lead to an increase in the utilisation ratio and
cement prices may come under pressure. In addition to
the volume and realisation parameters, the dependency
on imported coal is also one of the major concerns. At
the current market price the stock is trading at a PE of
7.7x its FY2012E and 5.4x its FY2013E earnings (based on
Bloomberg consensus estimates). The stock is not under
our active coverage and we do not have any rating on it.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We attended the analyst meet of Dalmia Bharat Enterprise
Ltd (DBEL) and the following are the key takeaways from
the meet:
Financial performance during the quarter: DBEL’s net
sales grew by 37.9% year on year (YoY) to Rs525.1 crore.
The revenue growth was driven by an impressive
growth in volume (up 20.6% YoY) as well as in
realisation (up 12.3% YoY). Further, inspite of an
increase in the cost of production by 4.9% the operating
profit margin (OPM) has expanded by 690bps to 23%.
Hence, revenue growth coupled with margin expansion
has resulted in a robust 125.1% growth at the net profit
level (consolidated).
Volume growth driven by capacity addition and
increase in market share: Inspite of the sluggish
demand environment in the southern region of India,
the company was able to deliver an impressive 20.6%
growth in volume which was driven by capacity
addition and a gain in market share in Tamil Nadu and
Andhra Pradesh (AP). As per the company’s
management, the volume growth in the southern
region was affected primarily due to political hurdles
and also because of a slowdown in the real estate
market. The management expects cement demand to
grow at 6% on an all India basis. However, the
company’s volume growth is expected to be better
than the industry’s average growth. On a year till date
(YTD) basis (April-August 2011) the company has posted
a 23.7% growth in its dispatches.
Supply discipline results in healthy realisation: The
average blended realisation during the quarter has
increased by 12.3% YoY to Rs3,920/tonne. The increase
in realisation is on account of the supply discipline
followed by the cement manufacturers in the southern
region. Further with an increase in the capital cost
for setting up a cement plant and increase in the price
of key inputs, the management believes cement prices
would move northwards and are unlikely to stabilize
at lower levels inspite of lower capacity utilisation
and capacity addition in FY2012 and FY2013
Cost pressure continues to pressure margin: The cost
of production on per tonne basis has increased by 4.9%
YoY to Rs3,284 (on blended basis) on account of a surge
in the cost of power & fuel (as the company sources
most of its coal requirement through imports which
are costly). However, with a sharp increase in cement
realisation, the company was able to post an expansion
in its margin during the quarter. Going ahead the
management believes that the margin may continue
to be volatile on a quarterly basis but on a yearly basis
the realisation will support the margin.
Entering the eastern region: The present cement
capacity of the company is at 9MTPA and it plans to
add another 10MTPA of green field capacity in a phased
manner. In phase 1 the company plans to set up a 2.5-
3mt capacity in the eastern region and the decision
on placing orders is expected by Q3FY2012. During
the quarter, DBEL commenced work for setting up
railway sliding at its AP plant to optimise logistics costs.
Outlook and valuation: Though the company has
managed to deliver a better volume growth, we
maintain our bearish demand outlook in the southern
region given the uncertain political environment.
Further any pick up in the cement offtake could lead
to an increase in the utilisation ratio and cement prices
may come under pressure. In addition to the volume
and realisation parameters, the dependency on
imported coal is also one of the major concerns. At
the current market price the stock is trading at a price
earning (PE) of 7.7x its FY2012E and 5.4x its FY2013E
earnings (based on Bloomberg consensus estimates).
The stock is not under our active coverage and we do
not have any rating on it.
Increased focus due to business restructuring
DBEL was holding all the three businesses (cement, sugar
and power) under one entity. But the management
proposed business restructuring and with the approval of
the shareholders the cement business had been demerged
with effect from April 2010. As per the new structure the
sugar business was kept in the existing entity (renamed
as Dalmia Bharat Sugar and Industries) while the cement
and the power businesses were transferred to the newly
formed DBEL. The business restructuring augurs well for
the company as it will streamline the decision-making
process and increase the efficiency in business processes
through focused management teams.
Valuation
Though the company has managed to deliver a better
volume growth, we maintain our bearish demand outlook
in the southern region given the uncertain political
environment. Further any pick up in the cement offtake
could lead to an increase in the utilisation ratio and
cement prices may come under pressure. In addition to
the volume and realisation parameters, the dependency
on imported coal is also one of the major concerns. At
the current market price the stock is trading at a PE of
7.7x its FY2012E and 5.4x its FY2013E earnings (based on
Bloomberg consensus estimates). The stock is not under
our active coverage and we do not have any rating on it.
No comments:
Post a Comment