30 July 2019
1QFY20 Results Update | Sector: Cement
Prism Johnson
Buy
BSE SENSEX
37,397
S&P CNX
11,085
CMP: INR93
TP: INR110 (+19%)
Motilal Oswal values your support
in the Asiamoney Brokers Poll 2019
for India Research, Sales and
Trading team. We
request your
ballot.
Healthy margins in cement; TBK and RMC suffer
Healthy realizations drive cement profitability:
1QFY20 revenue inched up
1% YoY (-10% QoQ) to INR15.1b (in line with our est.). Cement volumes grew
a modest 2%YoY. However, combined cement & clinker volume declined ~7%
YoY, which can be attributed to a sharp fall in clinker volumes. Cement
Division’s EBITDA/t improved to INR1,111 as against INR1,009 in 1QFY19,
mainly due to higher realizations offsetting the overall increase in costs.
TBK reports EBIT loss; RMC EBIT impacted by high cement prices:
TBK’s
revenue increased 6% YoY to INR4.2b. Segment volumes increased 3% YoY.
TBK reported EBIT loss of INR73m in 1QFY20 v/s EBIT loss of INR92m in
1QFY19. RMC sales stood at INR3.7b (-1% YoY). RMC reported EBIT of INR9m
in 1QFY20 v/s EBIT of INR106m in 1QFY19; the decline was mainly due to the
steep increase in cement prices. EBITDA for PRSMJ increased 2%YoY (flat
QoQ) to INR 1.85b (v/s our est. INR1.73b), with margins at 12.3% (+0.2pp
YoY; +1.3pp QoQ). PAT at INR656m (-7%YoY) was in line with our estimate.
Key highlights from management presentation:
(1) Out of the 15MW solar
power planned capacity, 6MW was commissioned during the quarter.
Balance capacity and additional 10MW solar capacity will be commissioned
during the year. (2) In the case of 22.5MW WHRS, work in progress is on
schedule and commissioning is expected by Jun’20.
Valuation and view:
We reduce our PAT estimate for FY20 by 5% to build in
higher depreciation impact from the current quarter. Our estimate for FY21
remains largely unchanged. Our SOTP value for PRSMJ is INR110/share. We
value the cement business at 6.5x Jun’21 EV/EBITDA; RMC at 6x Jun’21
EV/EBITDA and the TBK business at 1x EV/Sales. Maintain
Buy.
FY19
2Q
3Q
1.35
1.50
20.0
9.6
4,355
4,391
10.6
5.1
-0.6
0.8
13,353 14,398
14.6
10.3
12,550 13,308
803
1,090
6.0
7.6
385
400
436
437
121
24
103
277
0
0
103
277
33
87
31.9
31.4
70
190
70
190
0.5
1.3
FY20
2QE
3QE
1.27
1.50
-6.0
0.0
4,569
4,649
4.9
5.9
-2.1
1.8
13,557 15,258
1.5
6.0
12,322 13,766
1,235
1,492
9.1
9.8
460
460
467
470
30
35
338
597
0
0
338
597
118
209
35.0
35.0
220
388
220
388
1.6
2.5
(INR Million)
FY19
FY20E
4QE
1.76
0.4
4,739
4.3
1.9
18,080
7.4
16,254
1,826
10.1
460
470
41
937
0
937
319
34.1
617
617
3.4
6.27
11.2
4,423
1.7
59,556
10.5
54,008
5,547
9.3
1,601
1,741
207
2,413
113
2,301
841
36.5
1,460
1,573
2.6
6.08
-3.0
4,663
5.4
61,971
4.1
55,568
6,404
10.3
1,839
1,874
202
2,893
0
2,893
1,013
35.0
1,881
1,881
3.0
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
PRSMJ IN
503
46.6 / 0.7
119 / 62
7/26/-19
51
25.1
Financials & Valuations (INR b)
2019 2020E 2021E
Y/E Mar
Net Sales
59.6
62.0
66.4
EBITDA
5.5
6.4
6.8
PAT
1.6
1.9
2.0
EPS (INR)
3.1
3.7
4.0
Gr. (%)
123.4
19.6
8.0
BV/Sh (INR)
22.7
25.8
29.3
RoE (%)
14.5
15.4
14.6
RoCE (%)
11.6
13.0
12.8
P/E (x)
29.6
24.8
22.9
P/BV (x)
4.1
3.6
3.2
Estimate change
TP change
Rating change
Quarterly Performance (Standalone)
Y/E March
Sales Dispatches (m ton)
YoY Change (%)
Realization (INR/ton)
YoY Change (%)
QoQ Change (%)
Net Sales
YoY Change (%)
Total Expenditure
EBITDA
Margins (%)
Depreciation
Interest
Other Income
PBT before EO expense
Extra-Ord expense
PBT after EO Expense
Tax
Rate (%)
Reported PAT
Adj PAT
Margins (%)
E: MOFSL Estimates
1Q
1.67
13.0
4,380
-5.2
-3.2
14,977
13.1
13,168
1,809
12.1
376
448
32
1,017
0
1,017
315
31.0
702
702
4.7
4Q
1.75
4.8
4,545
0.5
3.5
16,828
4.3
14,983
1,845
11.0
440
421
31
1,016
113
903
406
44.9
497
610
3.6
1Q
1.56
-6.8
4,669
6.6
2.7
15,077
0.7
13,226
1,851
12.3
459
467
97
1,022
0
1,022
366
35.8
656
656
4.3
Pradnya Ganar – Research analyst
(Pradnya.Ganar@motilaloswal.com); +91 22 61291537
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.