Choice Institutional Equities kept a buy rating on Dalmia Bharat but set a target price of Rs 2180. The firm said, "We project elevated fuel and raw material cost to continue weighing on profitability." High costs and asset charges impacted recent earnings, though price hikes might offer some partial relief.
Buy
Choice Institutional Equities's report on Dalmia Bharat
Q2FY27 PAT was also impacted by exceptional charges of INR 3,390 Mn, relating to asset impairment, brand transition and employee separation cost, further weighing on reported earnings. Margin recovery to lag behind amid cost inflation: We project elevated fuel and raw material cost to continue weighing on profitability in H2FY27. Management has indicated a further fuel-cost impact of ~INR 75/t in Q3FY27, while recent price hike of ~INR 15/bag across key markets in September–October should provide partial relief; however, we believe sustained realisation improvement will be critical to offset cost. Given seasonal demand recovery and heightened competitive intensity, we expect pricing gains to be absorbed gradually rather than fully, translating into margin expansion in the near term.
Outlook
We retain our ‘BUY’ rating on DALBHARA but revise our TP to INR 2,180/share (from INR 2,405/share), reflecting our projection of a slower EBITDA recovery amid persistent fuel-cost inflation and incremental dilution from the Central India ramp-up.