Stock corner: Maintain ‘buy’ on Prism Johnson with a target price of Rs 104

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Published: May 14, 2019 3:53:00 AM

Q4FY19 revenue increased 4% y-o-y (+17% q-o-q) to Rs 16.8b (v/s est. of Rs 16.5b). Cement volumes stood at 1.75mt (+5% y-o-y) implying 100% utilisation, while cement realisations increased 0.5% y-o-y, led by stronger prices in the focus market.

Cement division operated at 100% utilisation in Q4FY19.

Q4FY19 revenue increased 4% y-o-y (+17% q-o-q) to Rs 16.8b (v/s est. of Rs 16.5b). Cement volumes stood at 1.75mt (+5% y-o-y) implying 100% utilisation, while cement realisations increased 0.5% y-o-y, led by stronger prices in the focus market.

Ebitda/tonne for cement increased by Rs 153/t y-o-y to Rs 971. TBK’s revenue increased 6% y-o-y to Rs 5.1b. Segment volumes increased 5.5% y-o-y. TBK reported Ebit loss of Rs 72m in Q4FY19 v/s Ebit of Rs 96m in Q4FY18. RMC sales stood at Rs 3.9b (+2% y-o-y).

RMC Ebit came in lower at Rs 45m for Q4FY19 v/s Ebit of Rs 112m in Q4FY18 due to increase in fuel prices and intense competition. Ebitda increased 9% y-o-y (+69% q-o-q) to Rs 1.8b, with margin at 11% (+0.5pp y-o-y; +3.4pp q-o-q). Hence, adj. PAT came in at Rs 610m (-3% y-o-y) v/s estimates of Rs 416m.

Cement division operated at 100% utilisation in Q4FY19. (2) 15mw solar power commissioning by end-Q1FY20; further addition of 15mw planned during FY20. (3) 22.5mw Waste Heat Recovery System (WHRS) order placed, capex of Rs 2b involved, commissioning by Jun’20. We increase our Ebitda estimate for FY20/21 by 13%/15% to build in cost improvement in the cement business.

We increase our PAT estimate for FY20/21 by 10.4%/5% as increase in Ebitda was offset by increase in tax estimate. Our SOTP value for PRSMJ is Rs 104/share. We value the cement business at 6.5x FY21 EV/Ebitda; RMC at 6x FY21 EV/Ebitda and TBK business at 1x EV/Sales. Maintain ‘Buy’ with a TP of Rs 104. We increase our Ebitda estimate for FY20/21 by 13%/15% to build in cost improvement in the cement business. We increase our PAT estimate for FY20/21 by 10.4%/5% as increase in Ebitda was offset by increase in tax estimate.

Prism Johnson is one of India’s leading integrated building materials company, with a wide range of products from cement, ready-mixed concrete, tiles, bath products to kitchens. The company has three divisions, viz. Prism Cement, H & R Johnson (India), and RMC Readymix (India). Cement business has a capacity of 7mt.

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