Choice Institutional Equities has reaffirmed its Buy rating on Dalmia Bharat with an unchanged target price of Rs 2,405 per share, expressing confidence in the company's long-term growth strategy supported by capacity expansion, stable pricing, disciplined capital deployment and operational synergies from the recently acquired JP Assets.

The brokerage expects Dalmia Bharat's installed cement capacity to increase from the current 54.7 million tonnes per annum (MTPA) to between 110 and 130 MTPA over the long term, with 12 MTPA scheduled to be commissioned by the third quarter of FY28. This expansion is expected to strengthen the company's pan-India presence while supporting future volume growth.

Choice Institutional believes the current pricing environment in the cement industry remains favorable and should largely offset the anticipated cost inflation of Rs 100-120 per tonne during the second quarter of FY27. The brokerage also expects continued cost optimization initiatives and a higher share of renewable energy usage to help contain rising power costs and support profitability.

Based on these factors, the brokerage projects Dalmia Bharat to deliver an EBITDA of Rs 972 per tonne in FY27, reflecting resilient operating margins despite temporary cost pressures. It further expects EBITDA to grow at a compound annual growth rate of 9% during FY26-FY29, driven by steady volume growth, improved realizations and operational efficiencies. The target valuation is based on an EV/Capital Employed multiple of 1.6x for FY28 estimates.

The brokerage highlighted Dalmia Bharat's strong first-quarter FY27 performance, where consolidated revenue stood at Rs 3,890 crore and EBITDA reached Rs 805 crore, both exceeding its estimates. Sales volumes increased to 7.6 million tonnes, reflecting a 9% year-on-year rise and outperforming overall industry growth.

Operationally, the company continued to benefit from its premiumisation strategy, with premium products contributing a record 25% of sales. Trade sales remained healthy at 66%, while blended cement continued to account for more than 80% of the overall product mix.

Although raw material costs remained elevated and fixed costs increased due to annual wage revisions and higher packaging expenses, fuel cost pressures were largely contained through efficient inventory management and operational initiatives.

The brokerage also highlighted the rapid integration of the acquired JP Assets, noting that commercial dispatches from the Chunar unit commenced within 22 days of acquisition, demonstrating strong execution capabilities. Brownfield expansion projects are expected to improve capital efficiency, while the company's Net Debt-to-EBITDA ratio of 1.47x provides sufficient financial flexibility to fund ongoing capital expenditure.

Looking ahead, Choice Institutional remains constructive on the cement sector, expecting infrastructure spending, PMAY implementation and improving urban housing activity to support demand recovery after the seasonal slowdown. However, it identified fluctuations in pet coke and coal prices, along with potential geopolitical disruptions to fuel supplies, as the key risks to its investment outlook.