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PrismCem Sensex
IndiaNivesh Research
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Prism Cement Ltd.
STOCK INFO
BSE 500338
NSE PRISMCEM
Bloomberg PRSC IN
Reuters PRIS.BO
Sector Cement & Cement Products
Face Value (Rs) 10
Equity Capital (Rs mn) 5,034
Mkt Cap (Rs mn) 25,168
52w H/L (Rs) 51/ 23
3m Avg Daily Vol. in mn (BSE+NSE) 542,121
SHAREHOLDING PATTERN %
(as on 31st Mar. 2014)
Promoters 74.9
FIIs 2.8
DIIs 3.7
Public & Others 18.7
Source: BSE
STOCK PERFORMANCE (%) 1m 3m 12m
PRISM CEMENT 19 119 18
SENSEX 5 16 19
PRISM CEMENT v/s SENSEX
Source: Capitaline, IndiaNivesh Research
Source: Capitaline, IndiaNivesh Research
Stock Idea
May 14, 2014
CMP : Rs.50
Rating : BUY
Target : Rs.60
Rating : NR
Target : NR
Current Previous
(NR-Not Rated)
Daljeet S. Kohli
Head of Research
Mobile: +91 77383 93371, 99205 94087
Tel: +91 22 66188826
daljeet.kohli@indianivesh.in
Y. Santosh
Research Analyst
Mobile: +91 77383 93416
Tel: +91 22 66188840
s.yellapu@indianivesh.in
Prism Cement is one of the few integrated building materials company (given
their wide presence across entire range of building solutions) with: (1) ~5.6 mtpa
cement plant capacity in central India; (2) with 54 msm of Ceramic tile capacity;
& (3) being a key domestic players in RMC space.
~5.6 mtpa cement plant to benefit from revival in Cements space during
FY15-16E
Currently Prism Cement operates the ~5.6 mtpa plant at Satna, Madhya Pradesh,
which also happens to be limestone belt. This access to limestone reserves ensure
adequate availability of raw materials. Currently, the plant in our view is operating
at ~80% levels. Post new government coming to power, we expect Infra activity to
pick-up and Prism would be no exception to gain from such revival in cement
demand. This demand revival would contribute to Prisms business as no major
capacity addition is there except for R-Infras 2.3 mtpa cement plant (at Maihar,
MP).

Particulars (Rs mn) FY14E FY15E FY16E
Net Sales 49,309 52,127 56,178
EBITDA 1,715 4,078 5,983
PAT (742) 173 1,816
Earnings Per Share (1.5) 0.3 3.6
Source: IndiaNivesh Research
EBITDA margins to expand from FY15E onwards
We are of view that Prism Cement would experience sharp EBITDA margin expansion
during FY15-16E, owing to the ongoing cost saving initiatives across all segments-
Cement, Tiles Bathroom Kitchen (TBK) and RMC. Our view is on the back of (1) New
silo Unit commencing operations at Satna: (2) Higher pet-coke consumption leading
to lower power consumption, (3) commencement of captive coal procurement at
chindwara, and (4) substitution of expensive LNG with three captive gasifiers across
TBK segment. All these initiatives, coupled with uptick in Cement/ Tiles business
demand would translate to higher return ratios (indicating benefits of operating
leverage coming in to play). We expect EBITDA margins to expand from ~3.0% levels
in FY14E to over 10% by FY16E.
Turnaround in Tiles business on Cards
H&R Johnson has been market leader in Tiles business for over last few years.
(1) Aggressive marketing by peers, (2) Chinese aggressive pricing policy and (3) peers
expansion has affected the growth prospects of H&R up to certain extent. Also,
H&Rs plants have been impacted due to higher fuel costs, resulting in margin
pressures. With new gasifiers getting commissioned, coupled with revival in demand
trends, we expect H&R to witness ramp-up in their Tiles business, which in turn
would translate to margins/ return ratios revival.
Cash Flow Generating Potential to help in Balance Sheet de-leveraging
Prism has been generating cash flow from operations to the tune of ~Rs 2 bn during
FY12-14E. With demand revival across Cements and Tiles business coupled with
EBITDA margin expansion comforts us that Prism is poised to generate Cash flow
from Operations to the tune of over Rs 3.5 bn each for FY15-16E. Again this cash
being generated could be partly used towards capex and partly for debt repayment.
As a result we expect de-leveraging to happen going forward.
IndiaNivesh Research Prism Cement Ltd | Stock Idea
Stock Idea (contd...)
May 14, 2014 | 2
Prism Cement is likely to announce good set of Q4FY14 results, on the back of
likely turn-around in its Cements business.
Recommend BUY with PT of Rs 60/share
At CMP of Rs 50, Prism is trading at FY15E EV/EBITDA multiple of 9.6x. We have
valued all 3 business by assigning target EV/EBITDA multiple of 6.0x for cement
business, 7.0x for Tiles business and 5.0x for RMC business, respectively to arrive at
the business value. We have valued Prism using Sum of the Parts (SoTP) based
valuation methodology to arrive at Price target of Rs 60. Given the 20% upside we
recommend BUY on the stock.
Our target price is taking into account conservative estimates. Post Q4 results and
meeting with the management, for any potential the target price could be revised
upwards.
Particulars (Rs mn)
FY16E
EBITDA
Target
Multiple (x)
Cements Business 3,316 6.0x 19,896
TBK Business 2,021 7.0x 14,147
RMC Business 646 5.0x 3,230
Enterprise Value 37,273
Debt 19,784
Cash 11,989
M-Cap for Prism Cement 29,478
Equity Shares 503
Treasury Stock 1
Target Price 60
Source: IndiaNivesh Research
IndiaNivesh Research Prism Cement Ltd | Stock Idea
Stock Idea (contd...)
May 14, 2014 | 3
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