Dalmia Bharat Limited delivered a resilient Q3FY26 performance, driven by healthy volume growth, disciplined cost management, and improving operating leverage. While realizations moderated sequentially, EBITDA margins expanded on a year-on-year basis, aided by logistics efficiencies and rising renewable energy usage. The company remains well-positioned to benefit from post-monsoon demand recovery and sustained government-led infrastructure spending. With major clinker and grinding projects progressing on schedule and leverage under control, Geojit values the stock at 12x EV/EBITDA and maintains a BUY rating with a target price of Rs. 2,508, implying an upside of about 17% from current levels.

Q3FY26 Performance Shows Volume Strength Amid Pricing Moderation

Dalmia Bharat reported consolidated revenue of Rs. 3,506 crore in Q3FY26, up 10.2% year-on-year, primarily supported by a 9% increase in cement volumes to 7.3 million tonnes. While realizations remained marginally higher on a YoY basis, they softened sequentially due to regional pricing pressures.

EBITDA for the quarter stood at Rs. 602 crore, reflecting an 18% YoY growth. On a per-ton basis, EBITDA was recorded at Rs. 825, underscoring the company’s ability to protect margins despite cost inflation in select input categories. EBITDA margin improved by 110 basis points YoY to 17.2%, though it declined sequentially due to temporary fuel cost pressures and lower realizations.

Cost Discipline and Logistics Efficiency Drive Margin Expansion

The company’s operational discipline was evident in its cost structure. Power and fuel costs per tonne rose marginally YoY, mainly due to higher pet coke prices, but this was offset by a sharp 5% YoY decline in logistics costs per tonne. Higher direct dispatches, optimized routes, and stable lead distances of around 277 km played a key role in sustaining freight efficiencies.

Excluding one-offs such as the Tamil Nadu mineral tax and transient fuel spikes, adjusted cost trends indicate a structural improvement, highlighting the success of ongoing efficiency initiatives across the manufacturing and distribution network.

Renewable Energy Ramp-Up Strengthens Structural Cost Savings

Renewable energy usage emerged as a critical margin lever. During the quarter, the renewable energy share increased to 48%, with total installed RE capacity reaching 410 MW, up sharply from 267 MW in FY25. Management expects further benefits as renewable capacity scales up, reducing exposure to volatile fossil fuel prices and improving long-term cost predictability.

This transition not only supports EBITDA resilience but also strengthens Dalmia Bharat’s ESG credentials, an increasingly important consideration for institutional investors.

Incentives and One-Offs: Near-Term Noise, Limited Long-Term Impact

Incentives accrued during the quarter stood at Rs. 91 crore, including prior-period components. Management has clarified that the normalized annual run-rate of such incentives is expected to be around Rs. 200 crore, suggesting limited earnings risk from this line item going forward.

Sequential volatility in margins should therefore be viewed as temporary, rather than indicative of structural deterioration.

Capacity Expansion Strategy Remains Firmly on Track

Dalmia Bharat’s expansion roadmap continues to progress as planned. The 3.6 MTPA Umrangso clinker line commenced commercial operations in January 2026, marking a key milestone. Meanwhile, grinding unit projects at Belgaum and Pune, along with the Kadapa expansion, are advancing on schedule.

The Belgaum unit is expected to deepen penetration in southern Maharashtra, while the Pune unit targets untapped western Maharashtra markets. The planned 6 MTPA addition at Kadapa will further strengthen the company’s presence in Andhra Pradesh and southern Karnataka, supported by bulk dispatches via the Chennai terminal.

By Q2FY28, Dalmia Bharat aims to achieve cement capacity of 61.5 MTPA and clinker capacity of 34.3 MTPA, reinforcing its position as a leading pan-India cement player.

Financial Discipline Preserved Despite Aggressive Capex

Capital allocation remains balanced and conservative. Capex deployment during Q3FY26 stood at Rs. 513 crore, taking 9M FY26 capex to Rs. 1,703 crore. The company has guided for total FY26 capex of around Rs. 2,700 crore, with cumulative spending of nearly Rs. 9,000 crore planned over the next two years.

Despite this, net debt to EBITDA remains comfortable at approximately 0.6x, well within management’s stated financial discipline framework. The balance sheet strength provides adequate headroom to fund expansion without compromising return metrics.

Outlook: Demand Recovery and Policy Tailwinds Support Earnings

Management expects Q4FY26 to remain strong, aided by post-monsoon demand recovery and continued government infrastructure spending. Early-quarter pricing trends indicate mild improvement, though near-term visibility remains limited.

Over the medium term, pricing is expected to be supported by rising entry barriers, industry consolidation, and improving demand-supply dynamics. Additionally, recent GST rate cuts on several construction materials could act as a policy tailwind, enhancing affordability and demand traction.

Fuel costs, particularly pet coke, have inched up, but mitigation strategies—including higher domestic coal usage, renewable energy ramp-up, and logistics optimization—are expected to cushion margin impact.

Valuation and Investment View

Dalmia Bharat currently trades at approximately 12x one-year forward EV/EBITDA, broadly in line with its two-year historical average. Geojit has valued the company at 12x EV/EBITDA to arrive at a target price of Rs. 2,508, implying an upside of about 17% from the current market price of Rs. 2,139.

Given strong volume momentum, improving cost structure, disciplined balance sheet management, and clear visibility on capacity expansion, Geojit maintains its BUY rating on the stock for a 12-month investment horizon.

Key Investment Levels for Investors

Current Market Price (CMP): Rs. 2,139
Target Price (12 months): Rs. 2,508
Expected Upside: ~17%
Valuation Basis: 12x FY27E EV/EBITDA