Buy Dalmia Bharat; target of Rs 2180: Choice Institutional Equities

What happened

Choice Institutional Equities retained a BUY rating on Dalmia Bharat but cut its target price to Rs 2,180 from Rs 2,405. The report said Q2FY27 profit was hit by exceptional charges of INR 3,390 Mn for asset impairment, brand transition and employee separation.

Confirmed

Global impact / market context

The lower target price signals the broker expects slower earnings before interest, tax, depreciation and amortisation (EBITDA, a rough cash-profit measure) recovery. Higher fuel and raw material costs squeeze profit per sale, while the Central India expansion adds costs and may dilute near-term returns for investors.

Analyst inference

Cement makers face rising fuel and raw material bills, and management flagged about INR 75 per tonne of extra fuel cost in Q3FY27. A September–October price rise of about INR 15 per bag gives only partial relief, and strong competition may stop the full increase from reaching profit.

Analyst inference

What to watch

1. Management has guided to a further fuel-cost impact of about INR 75 per tonne in Q3FY27, so investors should watch whether actual fuel bills match this stated figure. Confirmed
2. The report suggests sustained improvement in realised prices, meaning the money received per bag after discounts, will be needed to offset cost pressure; watch whether price rises hold across key markets. Proposed
3. Watch the Central India ramp-up, which means building up new plant output: slower sales there could add costs and dilute earnings, delaying the EBITDA recovery the revised target price assumes. Analyst inference

Evidence

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