MOSL: PRISM JOHNSON (Buy)-Significant miss led by higher costs
PRISM JOHNSON: Significant miss led by higher costs
(PRSMJ IN, Mkt Cap USD0.6b, CMP INR78, TP INR100, 28% Upside, Buy)
Cement profitability increases 4% YoY: 2QFY20 revenues declined 2% YoY to INR13.1b (in line with est.). Cement and clinker volume growth declined ~6% YoY due to heavy monsoons and overall economic slowdown. Cement division's EBITDA/t (+4% YoY) was lower than expected at INR615 (v/s est. INR967/t) due to higher costs.
- TBK and RMC report EBIT loss: TBK's revenue remained flat YoY at INR4.1b, while segment volumes increased 1% YoY. TBK's EBIT loss came in at INR103m in 2QFY20 (v/s loss of INR63m in 2QFY19). 2QFY20 RMC sales stood at INR3.5b (+2% YoY); RMC EBIT loss came in at INR45m (v/s EBIT of INR18m in 2QFY19) due to lower utilization levels during the quarter. EBITDA increased 3% YoY (-55% QoQ) to INR826m (v/s est. INR1.4b), with margin at 6.3% (+0.3pp YoY; -6pp QoQ). Company reported net loss of INR88m (v/s est. INR308m profit), as against INR70m profit in 2QFY19.
- Key highlights from management presentation: (1) The Board has decided to simplify the corporate structure by merging a few subsidiaries into standalone, subject to necessary approvals. (2) Prism has commissioned 7.5MW of solar power capacity. Work in progress in case of 22.5MWWHRS is on schedule and commissioning is expected by Jun'20
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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