Dalmia Cement (Bharat) which is a key player in the southern cement market, coupled with its presence in the booming sugar sector, has seen its stock jump 14 per cent over the past one month (as on Thursday) 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 5.5 million tonnes.

Meanwhile, Dalmia Cement’s current cement capacity is nine million tonnes, 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 with Dalmia Cement’s realisations declining nearly 0.3 per cent YoY to Rs 3,719 per tonne in the September 2009 quarter, given rapidly expanding capacity in this region and sluggish offtake.

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. Dalmia Cement’s market capitalisation was Rs 1,335.7 crore (as on Thursday) while the value of its investments in securities, including listed stocks alone was valued at Rs 563.7 crore at the end of March 2009.

Dalmia Cement’s portfolio of investments has increased in value since the start of the current financial year as OCL India’s stock price has jumped 176 per cent during this period. The company’s other significant investment include Reliance Communications, Madras Cements, Simplex Infra, KSK Energy and ACC, among others.

At its current stock price, Dalmia Cement trades at a reasonable 7.4 times its net profit in the past 12 trailing months. In comparison, India Cements trades at eight times while Madras Cements is available at six times its trailing earnings. However, if we net out the market value of Dalmia’s investments portfolio and its sugar division, the stock becomes highly attractive.