Choice Equity Broking has reaffirmed its BUY recommendation for Dalmia Bharat Limited, setting a target price of Rs 2,620, implying a 17.1% potential upside from current levels. The brokerage underscores robust capacity expansion, sustained cost optimization, and sector tailwinds as pivotal levers for future growth. Investors are urged to watch key operational milestones and market conditions as the company embarks on an aggressive expansion drive aimed at cementing its leadership in the Indian cement sector.

Summary of Choice Broking Investment Thesis

The research house highlights Dalmia Bharat's profitable growth trajectory, driven by aggressive capacity expansion and sustained margin improvement. Choice Equity Broking projects a 27.1% EBITDA CAGR through FY28, led by volume ramp-up and disciplined capital allocation. An expected dividend yield, robust return ratios, and energy optimization strategies together paint a resilient picture for investors. Risks remain tied to commodity price swings and execution timelines for new projects, but structural positives support a bullish medium-term view.

Strategic Capacity Expansion

Dalmia Bharat is executing one of the most ambitious expansion plans in the sector, aiming to increase installed cement capacity from 49.5 Mnt to 75.0 Mnt by FY28 via brownfield and greenfield projects.

Notable additions include the Belgaum and Pune (3.0 Mnt each) brownfield expansions, Kadapa (6.0 Mnt) greenfield plant, and a 3 Mntpa terminal in Chennai.

The company initiated trial production at the new Umrangso clinker unit (Assam, 3.6 Mnt), with commercial operations expected imminently.

Management is committed to capital discipline, maintaining capex efficiency and controlling project timelines to minimize margin risk.

Robust Financial Performance

Q2FY26 results display a resilient financial profile, with consolidated revenue at Rs 34,170 Mn (up 10.7% YoY), EBITDA at Rs 6,960 Mn (up 60.4% YoY), and a PAT jump to Rs 2,360 Mn (413% YoY).

The company's EBITDA margin soared to 20.4% in Q2, beating both estimates and prior-year numbers due to tightly managed costs and improved operating leverage.

PAT margin expanded significantly, marking a rare performance in an industry often pressured by volatile energy and logistics costs.

Shareholder returns are further boosted via an interim dividend of Rs 4/share, while net debt to EBITDA remains conservative at 0.56x.

Outlook: Earnings Visibility and Valuation

Choice Equity Broking's forecasts are anchored in the company's ability to deliver volume growth (9-10% annually through FY28) and realization improvement (2-4.5% per year), supported by sectoral demand rebound.

Projected EBITDA should rise from Rs 26,390 Mn (FY24) to Rs 49,404 Mn (FY28E); PAT is set to grow from Rs 8,260 Mn to Rs 22,286 Mn over the same period.

Estimated EPS will nearly triple over four years, moving from Rs 44.0 (FY24) to Rs 118.8 (FY28E).

ROE and ROCE are expected to improve markedly, benefiting from both expansion and operational optimization—ROCE hits 11.8% by FY28.

Key Financial Tables

Valuation Multiples and Target Price

The stock is currently valued at an EV/EBITDA multiple of 14.1x (FY25E), dropping to 9.8x by FY28E as profitability scales.

The target price of Rs 2,620 is derived using a conservative EV/CE multiple of 1.75x for FY27-28E.

Implied FY28 multiples at target: EV/EBITDA of 10.9x, PE of 23.1x, and PBV of 2.3x, indicating ample scope for rerating as returns on capital double.

Upside potential stands at an attractive 17.1%, comfortably above the brokerage’s BUY threshold for large-cap names.

Operational and Industry Tailwinds

Dalmia Bharat is dramatically scaling up renewable energy investments, with 576 MW capacity targeted by FY26E, up from 387 MW in Q2FY26.

The focus on cost reduction is ongoing, with an identified Rs 150-200/ton savings anticipated by FY28E via energy optimization and supply chain revamp.

Sector momentum supported by the GST rate cut and a broad demand rebound in infrastructure, with pricing power likely to persist across mature markets.

Risks and Sensitivities

Risks to the bullish thesis include execution delays for expansion projects, volatility in petcoke and coal prices, and unforeseen supply chain disruptions stemming from geopolitical crises.

The ambitious ramp-up requires flawless project management; even minor impediments could derail the rapid growth envisaged.

The company’s exposure to taxation shifts, as observed from the recent mineral tax in Tamil Nadu, poses a modest ongoing headwind.

Recommendation and Investment Levels

For investors, Dalmia Bharat remains a compelling medium-term play in Indian cement, with clear price and return triggers anchored by capacity expansion and margin gains.

BUY at current market levels around Rs 2,246, with a near-to-medium term target of Rs 2,620.

Trailing stop-loss for risk-averse investors: Rs 2,010.

Re-evaluate position if the company fails to deliver on commissioning timelines or if margin expansion stalls.