MOSL: PRISM CEMENT (Buy)-Weak performance by cement-TBK profitability improves
​Prism Cement: Weak performance by cement; TBK profitability improves
(PRSC IN, Mkt Cap USD0.6b, CMP INR111, TP INR128, 15% Upside, Buy)
- Volume growth muted: Standalone revenue was flat YoY (-12% QoQ) at INR11.6b (est. of INR13.2b) in 2QFY18. Cement volumes stood at 1.12mt (-3% YoY; -24% QoQ) due to the sand mining ban in UP/Bihar and partially in MP - the company's focus markets. We expect cement realizations to be lower by 2-3% QoQ, given lower prices in its focus markets.
- TBK losses reduced: TBK segment's revenue fell 9% YoY (-3% QoQ) to INR4.15b (est. of INR4.54b), as the prior-year period included excise duty in revenues. Volumes increased YoY after declining in the previous quarters. EBIT loss in TBK reduced to INR50m from INR181m in 2QFY17. The segment recorded near EBITDA breakeven in the quarter.
- EBITDA hurt by lower realization, cost push: EBITDA rose 52% YoY (-51% QoQ) to INR376m, with the margin at 3.2% (-2.53pp QoQ; +1.1pp YoY). Cement costing increased led by higher power & fuel cost/t (higher petcoke prices). Cement EBITDA/ton stood at INR331 (-INR20 YoY; -INR316 QoQ) on weak realizations/cost push. PAT was -INR239m v/s -INR213m in 2QFY17.
- RMC segment: RMC sales stood at INR3.1b (-5% QoQ, +3% YoY). EBIT loss for RMC was INR34m, as against a loss of INR66m in 1QFY18.
Prism Johnson Limited, formerly Prism Cement Limited, is a building materials company. The Company has interest in Portland cement, tiles, bathroom and kitchen (TBK) and ready mixed concrete (RMC). The Company's segments include Cement, TBK, RMC and Insurance. The Company has three divisions: Prism Cement, H&R Johnson (India) (HRJ) and RMC Readymix (India). Prism Cement is a cement manufacturer with units at Satna, Madhya Pradesh with a nameplate capacity of approximately 5.6 million tons per annum (MTPA) of cement. It manufactures Portland Pozzolana Cement (PPC) under the brand name Champion, Champion Plus, Hi-Tech and DuraTech. HRJ operates in TBK segment and offers end-to-end solutions of tiles, sanitary ware, bath fittings, kitchens and engineered marble and quartz. RMC Readymix (India) is ready mixed concrete manufacturer. It offers various concretes, including Enviroprotectcrete, FRCcrete, Thermocrete, Dyecrete and Perviouscrete.
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