Dalmia Cement, a key player in the southern Indian cement market, coupled with its presence in the booming sugar sector, has seen its stock jump14 per cent over the past month compared with a mere 3.2 per cent rise in Sensex during this period.
And despite the current run-up in the company’s stock price, Dalmia Cement trades at just 1.1 times its book value for the year ended March 2009 while other diversified cement players in the south like Madras Cements trades at nearly 2.1 times its book value and for India Cements at 1.2 times. However, Dalmia Cement’s leverage ratio was 1.7 times at the end of March 2009, which was higher than peers like India Cements, but Dalmia also had expanded its cement capacity aggressively over the past 18 months, with the addition of nearly 5.5Mt.
Dalmia Cement’s current cement capacity is 9Mt, primarily based in Andhra Pradesh and Tamil Nadu. The cement business contributed 69.4 per cent to Dalmia’s net sales of Rs 1,121.3 crore in the first half of FY10, while from sugar it was 21.5 per cent. Cement prices in the south have come under pressure of late, with Dalmia Cement’s realisations declining nearly 0.3 per cent YoY to Rs 3719 per tonne in the September 2009 quarter, given rapidly expanding capacity in this region and sluggish off-take. Dalmia also owns 21.7 per cent stake in the diversified player, OCL India, which is focused on the eastern cement market and demand in this region has been strong over the past several months