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Weak cement; better TBK

Prism Johnson’s (PRSMJ) Q3FY22 standalone EBITDA declined 35% YoY to Rs1.2bn, significantly below our and consensus estimates owing to weak cement division performance. Cement volumes (including clinker) declined 12% YoY, while EBITDA/te declined sharply 58% both YoY and QoQ to Rs385/te owing to higher input costs. However, TBK division performance was better with revenue rising 17% YoY with EBITDA margin of 12.7% (down 140bps YoY and up 180bps QoQ). PRSMJ plans to add greenfield grinding capacity of 2mnte in Eastern UP by Dec’24 and 5.5msm p.a. tile capacity at West Bengal by Jun’23. We downgrade the stock to ADD from BUY with a revised target price of Rs151/sh (earlier: Rs149/sh) based on 8x FY24E EV/E, given limited upside to our target price. Key risk: Lower than expected demand/ prices across segments.

Standalone revenue up 6% YoY at Rs14.6bn (I-Sec: Rs14.4bn).

Standalone EBITDA declined 35% YoY to Rs1.2bn (I-Sec: Rs1.8bn). Cement revenue declined 8% YoY at Rs5.7bn as volumes fell 12% YoY (up 1.3% QoQ) to 1.25mnte owing to sand mining issues. Realisation rose 4% YoY (marginally up QoQ) at Rs4,540/te with premium products’ contribution increasing 140bps YoY to 29% in Q3FY22. EBITDA/te declined sharply 58% both YoY and QoQ to Rs385/te (I-Sec: Rs840/te) due to higher input costs, lower cement sales YoY and lower clinker production due to kiln shutdown for maintenance. RMC revenue increased 8% both YoY and QoQ to Rs3.2bn, while RMC EBITDA came in at Rs73mn vs Rs92mn YoY and Rs7mn QoQ.

Consolidated TBK revenue grew 17% YoY (up 16% QoQ) to Rs6.3bn

Aided by 8.5% YoY domestic tiles volume growth; while exports declined 30% YoY. Revenue from sanitary ware and bath fittings grew 15.5% YoY. EBITDA stood at Rs807mn, up 5.5% YoY and 35% QoQ. JV entities added 4msm p.a. capacity (out of the proposed 6msm) at a capex of Rs0.5bn during Q3FY22 taking total capacity to ~64msm p.a.

Capacity expansion plans:

PRSMJ plans to add greenfield grinding capacity of 2mnte in Eastern UP (instead of earlier plan of adding 1.9mnte at Satna, MP) by Dec’24 at a capex of Rs5bn. It also plans to increase tile production capacity by 5.5msm (revised from 2.5msm) at Panagarh, West Bengal, by Jun’23 for a capex of Rs900mn (excluding land). On the sale of RQBE insurance business, regulatory approvals required for completing the transaction are yet to be received.

Consolidated net debt (ex-insurance) increased by Rs245mn QoQ

To Rs14.3bn as of Dec’21 owing to working capital needs. Overall, consolidated EBITDA (exinsurance) declined 37% YoY to Rs1.36bn and recurring PAT stood at Rs209mn, down 72% YoY. The Board has re-appointed Mr. Vijay Aggarwal as MD and Mr. Sarat Chandak as ED and CEO (HRJ) for a further period of 3 years.

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