- Q3FY26 earnings fell short despite 9.5% volume growth.
- Average Net Selling Price (NSR) dropped 4% QoQ, eroding margins.
- Raw‑material cost surge tied to Tamil Nadu Mineral Bearing Land Act.
- EBITDA per tonne fell to Rs 774 from Rs 898, prompting a HOLD downgrade.
- Valuation now sits at ~11× FY27‑28 EBITDA; target price nudged to Rs 2,302.
- Sector peers face similar pricing pressure, but Tata‑Cement’s cost‑pass‑through may cushion earnings.
You missed Dalmia Bharat’s pricing squeeze, and it’s costing you.
The cement giant reported a softer‑than‑expected Q3FY26 operating performance, and the numbers tell a cautionary tale for anyone still betting on a smooth ride. Volume growth stayed respectable at 9.5% YoY, but weak pricing and a cocktail of higher input costs forced EBITDA per tonne down to Rs 774, a full 14% slide from the prior quarter. Prabhudas Lilladher’s analysts responded by trimming the recommendation to HOLD and nudging the target price up modestly to Rs 2,302, while the valuation stretched to roughly 11× FY27‑28 EV‑EBITDA. For a sector already wrestling with price volatility, the signal is clear: the upside may be limited unless cost pressures ease.
Why Dalmia Bharat’s Margin Compression Mirrors India Cement Trends
The Indian cement landscape is in the throes of a pricing correction that began in late 2023 when demand‑driven price hikes hit a ceiling. Dalmia’s 4% QoQ NSR decline reflects a broader softening in the East and South markets, where competition intensified and builders turned price‑sensitive. Lower freight costs helped offset some of the pain, but they were insufficient to offset the surge in raw‑material (RM) costs—especially the higher limestone and gypsum prices driven by the Tamil Nadu Mineral Bearing Land Act. When RM costs rise, EBITDA margins contract unless the firm can pass those costs onto customers, a feat that’s proving increasingly difficult.
How Competitors Tata‑Cement and Adani Total Gas Are Positioning Against Rising Input Costs
Tata‑Cement, the sector’s largest player, has leaned heavily on its diversified geographic footprint and stronger brand pricing power to cushion against falling NSR. Its recent earnings call highlighted a proactive cost‑pass‑through strategy that kept EBITDA per tonne relatively stable. In contrast, Adani Total Gas (a downstream energy supplier to cement plants) is benefitting from higher pet‑coke and coal prices—fuel inputs that Dalmia plans to blend more of, albeit with a short‑term cost drag. Both peers are watching Dalmia’s cost curve closely; any misstep by Dalmia could shift market share toward the more agile operators.
Historical Pricing Cycles: What the 2015‑16 Cement Slump Taught Investors
Back in 2015‑16, the Indian cement sector experienced a similar price contraction after a four‑year boom. Companies that had over‑leveraged during the high‑price era saw EBITDA margins plunge, and many were forced to cut capex or delay expansion. Those that maintained a disciplined cost structure—like ACC and Ambuja—emerged with stronger balance sheets and were able to capture market share once prices recovered. The lesson for Dalmia is stark: without a resilient cost base, the current dip could become a prolonged earnings trough rather than a brief hiccup.
Technical Snapshot: What the Stock’s EV‑EBITDA Multiple Says Now
At a current EV‑EBITDA multiple of 11.6× for FY27 and 9.9× for FY28, Dalmia sits near the upper end of the sector’s historical range (8‑12×). The multiple reflects optimism about FY28 volume upside but also embeds a risk premium for the pricing headwinds. A break below the 200‑day moving average could trigger further downside pressure, while a sustained rally above the 50‑day average might indicate that the market is already pricing in a recovery in NSR. Traders should watch the relative strength index (RSI) for over‑bought signals; a reading above 70 would suggest a potential short‑term correction.
Investor Playbook: Bull vs. Bear Cases for Dalmia Bharat
- Bull Case: FY28 incentives improve, volume growth accelerates to >10% YoY, and the company successfully shifts to a cheaper fuel mix (more domestic coal and renewables). This would lift EBITDA/t to Rs 850, compress the EV‑EBITDA multiple to ~9×, and push the share price toward Rs 2,600.
- Bear Case: NSR continues to fall, raw‑material costs remain elevated, and the company’s cost‑pass‑through ability is hampered by weak demand in the East and South. EBITDA/t could slide below Rs 700, the EV‑EBITDA multiple could expand to >13× due to earnings pressure, and the stock may retreat to the Rs 1,800‑1,900 zone.
For investors who value disciplined cost management and a clear path to margin recovery, a cautious HOLD with a watch‑list trigger at Rs 2,100 (upside) and Rs 1,850 (downside) makes sense. Those seeking higher conviction should weigh the comparative resilience of peers like Tata‑Cement before reallocating capital.