MOSL: PRISM JOHNSON (Buy)-Results below estimate led by higher-than-expected costs
Prism Johnson: Results below estimate led by higher-than-expected costs
(prsmj IN, Mkt Cap USD0.6b, CMP INR86, TP INR106, 23% Upside, Buy)
- Cost-push impacts cement profitability: Prism Cement’s (PRSMJ) standalone 2QFY19 revenue increased 15% YoY (-11% QoQ) to INR13b (est. of INR12.8b). Cement volumes stood at 1.35mt (+20% YoY,) higher than est. of 1.26mt due to market share gain. Cement realizations declined 0.6% QoQ, led by weaker prices in the focus market. EBITDA/ton for cement declined by INR421/t QoQ to INR588 led by cost-push effect due to higher power and fuel and Freight costs.
- TBK reports EBIT loss; RMC sales increase 9%: TBK’s revenue declined 1% YoY to INR4.09b. The segment volumes decreased 2% YoY during the quarter on account of transport strike affecting JV sales/operations and Kerala floods. TBK reported EBIT loss of INR63m in 2QFY19 v/s EBIT loss of INR50m in 2QFY18. RMC sales stood at INR3.4b (+9% YoY), due to a pick-up in both real estate and infrastructure sector, especially road construction. EBIT was reported at INR18m for 2QFY19 v/s EBIT loss of INR34m in 2QFY18. EBITDA increased 2x YoY (-56% QoQ) to INR 803m, with margin at 6% (+2.5pp YoY; -6pp QoQ). Hence, PAT came in at INR70m (v/s loss of INR 239m in 2QFY18) v/s our estimate of INR401m.
- 1HFY19 Performance: Volumes grew 16% YoY, resulting in sales/EBITDA growth of 14%/2x in 1HFY19. PAT turned positive to INR772m in 1HFY19 as against loss of INR72m in 1HFY18. We expect volumes to increase 4% YoY in 2HFY19. Sales/EBITDA/PAT are expected to grow by 6%/-1%/-4% YoY for 2HFY19.
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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