Dalmia Bharat shares plunge 7% to over 4-year low after weak Q2 results; six brokerages cut target prices

Dalmia Bharat shares opened at Rs 1,545 on NSE and fell 7.2 percent to touch an intra-day low of Rs 1,507.70. At around 12.50 pm, the stock was trading 5.49 percent lower at 1536.50. Several brokerages expressed concerns over the company's near-term profitability, cost pressures and losses in market share. HSBC downgraded the stock to 'Hold' from its earlier rating, while Morgan Stanley maintained an Underweight stance.

On the other hand, Citi, CLSA, Jefferies and Prabhudas Lilladher retained positive ratings but lowered their target prices. Dalmia Bharat Q2FY27 results Dalmia Bharat Ltd a consolidated net loss of Rs 205 crore in the September quarter of FY27. The company had posted a net profit of Rs 239 crore in the July-September period of the previous fiscal year, according to a regulatory filing. Revenue from operations rose 4.27 per cent to Rs 3,563 crore in the September quarter, compared with Rs 3,417 crore in the year-ago period.

Dalmia Bharat reported exceptional expenses of Rs 339 crore during the quarter, related to the acquisition of Jaiprakash Associates Ltd's cement business, impairment of assets and a voluntary separation scheme for employees. "During the September quarter, the company recognised an impairment loss of Rs 282 crore on three captive power plants, reflecting the increasing share of lower-cost renewable energy sources, and on a brand discontinued by the group.

It also incurred a one-time charge of Rs 57 crore for implementing a separation scheme for eligible employees at select units," it said. It reported profit before exceptional items and tax of Rs 46 crore, down 85.53 per cent YoY. It was Rs 318 crore in the corresponding period last fiscal year. "EBITDA stood at Rs 493 crore, impacted by cost headwinds," the company said in its earnings statement. Dalmia Bharat's sales volume rose 3 per cent to 7.1 million tonnes (MT) during the September quarter.

Total expenses of Dalmia Bharat in the September quarter were at Rs 3,563 crore, up 12.57 per cent year-on-year. Total income, which includes other income, was at Rs 3,609 crore in the second quarter of FY27, up 3.61 per cent year-on-year. In the first half (H1), consolidated income of Dalmia Bharat was up 6.55 per cent at Rs 7,638 crore. Brokerages on Dalmia Bharat HSBC on Dalmia Bharat: Hold, cuts share price target to Rs 1,820

Brokerage firm HSBC downgraded Dalmia Bharat to 'Hold' and cut its target price to Rs 1,820 per share. The brokerage cited muted volume growth, large cost increases and asset impairment drive net loss as key factors behind the company's weak numbers in the Q2FY27. It also expects the acquired assets to remain a drag on profitability in the October-December quarter (Q3 FY27), with breakeven targeted by the end of FY27.

Morgan Stanley on Dalmia Bharat: Underweight, target price Rs 1,640 Morgan Stanley gave 'Underweight' rating on Dalmia Bharat with a target price of Rs 1,640 per share. The brokerage described the September-quarter results as very weak, citing volume pressures, partly due to seasonality, and elevated cost metrics. Though operating leverage benefits are expected to support performance in the second half of FY27, Morgan Stanley expects variable costs to stay elevated, partly offsetting the benefits of recent cement price hikes.

The brokerage retained its relatively underweight stance, citing weak profitability. CITI on Dalmia Bharat: Retains ‘Buy’, cut target price to Rs 1900 Citi retained its 'Buy' rating on Dalmia Bharat but trimmed its target price to Rs 1,900 from Rs 2,150. The brokerage stated Q2 EBITDA fell 29 percent YoY to around Rs 490 crore, approximately 3 percent below its estimates. Higher costs, which rose 9 percent, offset the benefits of 3 percent volume growth and a 1 percent improvement in realisations.

Adjusted EBITDA per tonne stood at Rs 694, against Rs 1,055 in Q1 and Rs 1,010 last year. The QoQ EBITDA decline reflected lower realisations, higher costs, lower volumes and losses associated with the Jaiprakash Associates cement assets. Citi also noted that the company's net debt-to-EBITDA ratio increased to 2x from 1.5 x in the previous quarter. Despite the disappointing results and limited visibility on cost improvements in the December quarter, the brokerage expects medium-term progress on premiumisation and cost efficiencies could yield favourable returns.

It expects higher fuel costs and losses from acquired assets to be partly offset by operating leverage, a better regional mix and higher cement prices. Citi also described the company's valuation at around $60 per tonne of enterprise value as inexpensive. CLSA on Dalmia Bharat: Outperform, Target price cut to Rs 2,000 CLSA maintained its 'Outperform' call on Dalmia Bharat but lowered its target price to Rs 2,000 per share.

The brokerage said the September-quarter performance was sharply below expectations and weaker than that of peers, due to an adverse geographical mix, market share losses, losses from acquired assets and a sharper impact from rising costs. CLSA expects near-term profitability to improve on cement price hikes, better fixed-cost absorption and the ramp-up of acquired assets. However, these benefits could be partly offset by higher fuel costs.

Over the medium term, execution on both asset utilisation and cost-saving initiatives will be key the key to watch. While valuations appear undemanding, the brokerage noted that triggers for the stock remain back-ended. Jefferies on Dalmia Bharat: Buy, target price cut to Rs 2,125 Though brokerage firm Jefferies maintained its 'Buy' rating on Dalmia Bharat, it reduced its target price to Rs 2,125 per share.

The brokerage said the company delivered a weak September-quarter, with EBITDA down 29 percent YoY on eastern region, where volumes and pricing remained subdued, alongside higher costs. Jefferies expects industry-wide cement price hikes should support a recovery in the second half of FY27. However, losses linked to the Jaiprakash Associates assets are expected to increase in the December quarter before easing subsequently.

The brokerage also flagged an unexpected management transition, with the company's chief marketing officer (CMO) becoming an adviser to Dalmia and the chief financial officer (CFO) taking new charges of sales and marketing. Jefferies cut its EBITDA estimates by 7-11 percent to account for near-term weakness. Emkay Global on Dalmia Bharat: Add, cuts target to Rs 1,850 Emkay Global Financial Services downgraded Dalmia Bharat to 'Add' from 'Buy' and reduced its target price to Rs 1,850 from Rs 2,050.

The brokerage cited losses in market share and a decline in earnings weighed on the company this time around. The company's share of trade dipped to 63% from 66% a quarter ago, the brokerage noted. It cut its estimates for the company's EBITDA by 7 percent to Rs 3,016 crore for FY27, by nearly 6 percent to Rs 3,711 crore for FY28, and by 7 percent to Rs 4,164 crore for FY29. Further, the brokerage said the stock provides limited upside at current valuations.

Prabhudas Lilladher on Dalmia Bharat: Buy, cuts target to Rs 1,970 Prabhudas Lilladher maintained its 'Buy' recommendation on Dalmia Bharat but lowered its target price to Rs 1,970 from Rs 2,015. The brokerage attributed the weak quarterly results to heavy rainfall and floods that disrupted demand across eastern and northeastern India. The brokerage trimmed its EBITDA estimated by 2.3 percent for FY28 and by 1.2 percent for FY29.

However, targeted cost savings of around INR 75 a tonne in FY27 provide an additional lever to mitigate cost pressures, while successful integration of new assets and a gradual improvement in capacity utilisation will be key for sustainable earnings growth, Prabhudas Lilladher said.