Results Review for Dalmia Bharat and Karur Vysya Bank

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Dalmia Bharat:

We maintain our BUY rating on Dalmia Bharat Ltd B (NS: DALB ) with an unchanged TP of INR 2,560/sh (13x its Sep-25E consolidated EBITDA). We continue to like Dalmia for its healthy volume, margin, and comfortable balance sheet outlook. In Q2FY24, Dalmia reported sub-par volume growth (+7% YoY) on market share loss in the east. However, unit EBITDA recovered INR 85/MT QoQ (up INR 300/MT YoY) to INR 955/MT, on cool-off in fuel and freight expenses. We estimate the company to deliver a 15% volume CAGR during FY23-26E, supported by ongoing expansions. We estimate unit EBITDA will rebound to >INR 1,000/MT H2FY24 onwards, benefitting from fuel cost reductions, the rising share of green power, and op-lev gains (as utilization rises). Dalmia remains among our top picks in the cement sector.

Karur Vysya Bank (NS: KARU ): Karur Vysya Bank (KVB) delivered an all-time high PAT, led by healthy loan growth (~16% YoY) and lower credit costs (0.7% annualized). GNPA improved to 1.7% (-26bps QoQ), led by negative net slippages (-70bps annualized as a % of advances). Loan growth was steady across segments, driven by MSME (+19% YoY), loans against property (+65% YoY), housing (+18% YoY), and PL (+119% YoY). Management continues to focus on retail deposit mobilization while maintaining a steady-state growth strategy. With continued deposit repricing likely in the upcoming quarter, we see a limited upside to margins and negligible scope for operating leverage, given sustained investments in distribution and people, reflecting in an elevated opex-to-assets ratio. We tweak our FY24E-25E earnings estimates by 3-4% each and maintain ADD with a revised TP of INR150 (1.2x Mar-25 ABVPS).

Costs Cooling Off Drive Margin; Volume Growth Sub-Par

We maintain our BUY rating on Dalmia Bharat with an unchanged TP of INR 2,560/sh (13x its Sep-25E consolidated EBITDA). We continue to like Dalmia for its healthy volume, margin, and comfortable balance sheet outlook. In Q2FY24, Dalmia reported sub-par volume growth (+7% YoY) on market share loss in the east. However, unit EBITDA recovered INR 85/MT QoQ (up INR 300/MT YoY) to INR 955/MT, on cool-off in fuel and freight expenses. We estimate the company to deliver 15% volume CAGR during FY23-26E, supported by ongoing expansions. We estimate unit EBITDA will rebound to >INR 1,000/MT H2FY24 onwards, benefitting from fuel cost reductions, the rising share of green power, and op-lev gains (as utilization rises). Dalmia remains among our top picks in the cement sector.

Q2FY24 performance: Dalmia reported a sub-par 7% volume growth YoY (owing to market share loss in the east—mainly in West Bengal and north Bihar). Its trade sales share rose to 68% vs 63/64% QoQ/YoY. In line with earlier guidance, its energy cost cooled off QoQ (fuel cost came off INR 0.40/mn Cal QoQ to INR 1.58/mn Cal). Freight cost fell by INR 130/MT QoQ as the lead distance was reduced by 3% QoQ and on lower clinker movement. These more than offset a 1% QoQ NSR fall and op-lev loss. Thus, unit EBITDA recovered INR 85/MT QoQ to INR 955/MT (+INR 300/MT YoY).

Con call KTAs and outlook: The company noted that it has implemented a sales strategy to arrest market share loss in the eastern region and this would start yielding results from Q4FY24 onwards. Its CC ratio remained stable and high at ~1.71x. It guided that there is room for additional reduction (though marginal) QoQ in its fuel costs from its low-Q2 levels. Dalmia expects lead distance to remain under 300 km and share of green power to continue to rise from 29/21% in Q2FY24/FY23. It maintained its FY24E Capex guidance of INR 65bn (including JPA’s acquisition cost of INR 35bn). The company spent INR 9/6bn in Q1/Q2FY24. It remained hopeful to close the JPA acquisition in FY24. It expects peak net debt of ~INR 30bn, factoring in Capex and acquisitions. We trim our volume estimates for FY24/25/26E by ~3% each. However, we maintain our EBITDA/APAT estimates, as we raise our NSR estimates after a recent price uptick across its markets. During FY23-26E, we estimate Dalmia will deliver a strong 15% volume CAGR along with unit EBITDA of >INR 1,000/MT. Despite its aggressive expansions, Dalmia’s balance sheet will remain comfortable, in our view.

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