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Strong operating performance continues

Prism Johnson’s (PRSMJ) Q4FY21 standalone EBITDA grew 68% YoY to Rs2.4bn, above our estimates led by higher cement volumes which grew 26% YoY and 34% QoQ. Besides, consolidated TBK volumes grew strong at 55% YoY with EBITDA margins of 12.6% owing to better product mix and operating leverage. PRSMJ announced addition of 1.0mnte grinding capacity at Satna to be commissioned by Sep’23. It also announced a greenfield tile capacity expansion of 2.5 MSM at Panhagarh, West Bengal and another expansion of 6 MSM at its JV entities - both likely to commission by Q4FY23. Consolidated net debt declined by Rs6.3bn in FY21 to Rs12.3bn as of Mar’21. Factoring in improved profitability and return ratios, we raise our target multiple to 8x (earlier 7x) and raise our target price to Rs150/sh (earlier: Rs118) based on 8x FY23E EV/E. We downgrade the stock to ADD from Buy post ~60% stock return over the past four months and reasonable valuation at 7.5xFY23E EV/E. Key risk: Lower than expected demand / prices across segments.

Standalone revenues were up 23% YoY at Rs16.9bn (I-Sec: Rs16.0bn)

Standalone EBITDA increased 68% YoY to Rs2.4bn (I-Sec: Rs2.2bn). Cement revenues were up 24% YoY at Rs8.3bn. Volumes grew 26% YoY to 1.9mnte (2yr CAGR of 4%); while realisation was flat QoQ at Rs4,356/te. Premium products’ contribution increased 550bps YoY to 28.9% in Q4FY21. Cement EBITDA/te declined 14% YoY to Rs875/te (I-Sec: Rs946/te) mainly due to various cost escalations. RMC revenues declined 6% YoY to Rs3.3bn, while RMC EBITDA increased to Rs198mn in Q4FY21 against Rs20mn in Q4FY20 led by cost rationalisation initiatives despite decline in revenues

Consolidated TBK revenues grew 45% YoY to Rs6.14bn aided by 55% YoY volume growth in Q4FY21. TBK posted highest-ever quarterly EBITDA of Rs772mn (Rs57mn in Q4FY20) with margins improving 1,120bps YoY to 12.6% owing to better product mix and operating leverage. Overall, consolidated EBITDA rose 76% YoY to Rs2.4bn. Recurring PAT stood at Rs1.4bn.

Capacity expansion plans:

Debottlenecking at Satna plant in Madhya Pradesh will increase cement capacity by 0.9mnte and clinker capacity by 1.1mnte by June’22. The company further plans to increase grinding capacity (1.0mnte at Satna by Sep’23 for a capex of Rs2.5bn) and tile capacity (2.5MSM at Panagarh, West Bengal by Jan’23 for a capex of Rs550mn and 6MSM at its JV entities by Mar’23 for a capex of Rs700mn) which is likely to be met primarily through internal accruals.

Consolidated net debt (ex-insurance) reduced by Rs2.5bn (Rs6.3bn in FY21) to Rs12.3bn as of Mar’21. OCF generation was strong at Rs9.8bn in FY21 aided by working capital release of Rs7.2bn. Insurance JV stake sale is still awaiting regulatory approvals, which would further reduce net debt by Rs3.5bn.

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