Emkay Global Financial's report on Prism Johnson
Higher profits in the cement segment (EBITDA/ton of Rs999 vs. estimated Rs853) helped Prism Johnson beat estimates. EBITDA stood at Rs1.4bn vs. estimated Rs1.2bn. EBITDA losses in TBK and RMC segments were higher than our estimates. Key positive was a 5.3% yoy/7.7% qoq fall in Cement segment’s opex/ton. Key negatives: 1) Tiles volume fell 31% yoy; 2) Cement realization declined 1.3% qoq on higher non-trade sales; 3) Debt rose Rs3.8bn to Rs18.5bn; and 4) EBITDA losses in RMC/TBK segments. Prism Johnson is planning to establish a waste heat recovery system (WHRS) of 22.5MW by Q3FY21E, which will help reduce energy costs. Volume trends in May have been better than earlier expectations as demand has recovered in rural/semi-urban areas.
We raise FY21-23E EPS by 3-5% on higher sales volumes. Net D/E at 1.6x in FY22/23E and net debt/EBITDA at 3.7x/3.2x in FY22/23E seems high in absence of a capex plan. Downgrade to Hold from Buy as we value the cement business at 6.5x EBITDA (vs. 7x).
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