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Anand Rathi Research India Equities
India I Equities
Jaspreet Singh Arora
+9122 6626 6727
jaspreet@rathi.com
Manish Valecha
+9122 6626 6552
manishvalecha@rathi.com
Surbhi Lodha
surbhilodha@rathi.com
Building Material
Result Update






























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Rating: Buy
Target Price: `90
Share Price: `74
Key data PRSC IN / PRIS.BO
52-week high / low `90 / `23
Sensex / Nifty 26108 / 7780
3-m average volume US$0.3m
Market cap `37.2bn / US$620m
Shares outstanding 503.4m
Shareholding pattern (%) Sep14 Jun14 Mar14
Promoters 74.9 74.9 74.9
- of which, Pledged - - -
Free Float 25.1 25.1 25.1
- Foreign Institutions 3.8 3.0 2.8
- Domestic Institutions 7.9 7.9 3.7
- Public 13.4 14.2 18.6
20 October 2014
Prism Cement
Subdued quarter; 2H to be better; Buy
Key takeaways
Strong cement growth. Prism Cements (Prism) realizations, at `3,920/ton
(as estimated), rose 5% yoy (flat qoq). Aggregate cement volumes were up
14% yoy (down 13% qoq), to 1.34m tons, led by demand recovery in markets
of operations. Cement revenue, thus, grew 20%. EBITDA per ton came in at
`315 (2QFY14: -`180, 1QFY15: `600); adjusted for one-time income of
`170m, it was `180, in line with estimate. Cost-saving measures such as usage
of pet coke (instead of coal), coal from captive mine in MP (available till
Mar15), and stabilisation of Line 2 at Satna - kept cost inflation in check.
RMC revenue up 7%. RMC revenue rose 7% yoy, led by early signs of
recovery in the construction sector. The company reported EBIT margin of -
1.5% (-1% yoy), due to lower capacity utilisation and rise in costs (chiefly fuel).
After few plants got demobilized during the quarter, the company is planning to
relocate its unused/underutilized assets at new locations. Thus, with rise in
utilisation, performance is expected to improve.
TBK revenues up 16%. Strong growth in TBK revenues was on the back of
higher capacity utilization (+80%) post implementation of the cost saving
measures, and intensive activities on the marketing front. PBIT margin was a
low 0.1% (-1.2% yoy), as part of the operations had to run on high-cost fuels
due to disruption in gas supply from GAIL. With higher capacity utilization
and more sales of value-added products, profitability could rise in 2HFY15.
Our take. 2QFY15 EBITDA was in line with estimate. PAT got a boost
from 170m of one-time income from refund of earlier year charges in
cement division. Adjusted PAT was in line with estimates. We expect
profitability to improve in 2HFY15 and FY16, driven by improved
performance across divisions, mainly cement. With no major capex planned,
focus on debt reduction continues. Turnaround in profitability and lower debt
could improve RoE and RoCE over FY14-16. Our target is based on 9x
FY16e EV/EBITDA on a consolidated basis. Risk. Lower cement prices.
Year-end: Mar FY15e FY16e
Sales (`m)
56,547 64,317
Net profit (`m)
68 1,800
EPS (`)
0.1 3.6
Growth (%)
(103.1) 2,548.8
PE (x)
548.2 20.7
EV/EBITDA (x)
14.0 8.1
P/B (x)
3.7 3.2
RoE (%)
0.7 16.6
RoCE (%)
7.7 16.0
Net gearing (x)
1.9 1.5
Source: Anand Rathi Research
Year-end: Mar 2QFY14 2QFY15 % yoy 1HFY14 1HFY15 % yoy
Sales (`m)
11,514 13,320 15.7 22,825 27,159 19.0
EBITDA (`m)
(261) 404 (254.9) 86 1,531 1,688.6
EBITDA margin (%)
(2.3) 3.0 531 0.4 5.6 526
EBITDA per ton (`)
(181) 316 (274.9) 18 468 2,515.0
Interest (`m)
614 643 4.7 1,163 1,292 11.0
Depreciation (`m)
433 330 (23.8) 861 696 (19.2)
Other income(`m)
100 105 5.1 146 190 29.8
Tax (`m)
(58) (96) 66.3 (163) (32) (80.6)
Adjusted PAT (`m)
(1,151) (368) (68.1) (1,630) (235) (85.6)
Reported PAT (`m) *
176 (198) (212.5) (303) (65) (78.5)
Source: Company, Anand Rathi Research * Including extraordinary income/expense



20 October 2014 Prism Cement Subdued quarter; 2H to be better; Buy
Anand Rathi Research 27
Quick Glance Financials and Valuations
Fig 1 Income statement (`m)
Year-end: Mar FY13 FY14 FY15e FY16e FY17e
Net revenues 47,427 49,443 56,547 64,317 73,826
Revenue growth (%) 5.8 4.3 14.4 13.7 14.8
- Op. expenses 45,085 48,244 52,546 57,581 64,693
EBIDTA 2,342 1,199 4,001 6,736 9,133
EBITDA margin (%) 4.9 2.4 7.1 10.5 12.4
- Interest expenses 1,903 2,415 2,500 2,600 2,650
- Depreciation 1,598 1,766 1,800 1,900 1,950
+ Other income 313 303 400 450 500
- Tax (235) (462) 33 886 1,661
Effective tax rate (%) 28.3 36.1 33.0 33.0 33.0
Reported PAT (595) (816) 68 1,800 3,372
+/- Extraordinary items (16) (1,402) - - -
+/- Minority interest - - - - 1.00
Adjusted PAT (611) (2,218) 68 1,800 3,372
Adj. FDEPS (`/sh) (1.2) (4.4) 0.1 3.6 6.7
Adj. FDEPS growth (%) 124.5 263.0 (103.1) 2,548.8 87.4
Source: Company, Anand Rathi Research

Fig 3 Cash-flow statement (`m)
Year-end: Mar FY13 FY14 FY15e FY16e FY17e
PAT (611) (2,218) 68 1,800 3,372
+ Non-cash items 1,361 1,299 1,800 1,900 1,950
Cash profit 750 (919) 1,868 3,700 5,322
- Incr./(Decr.) in WC 1,649 (1,994) 2,459 237 239
Operating cash-flow (899) 1,075 (591) 3,463 5,083
- Capex 2,736 2,405 1,500 1,500 1,500
Free cash-flow (3,635) (1,330) (2,091) 1,963 3,583
- Dividend - - - 418 784
+ Equity raised 22 1,402 (0) - -
+ Debt raised 3,305 (231) 1,921 - -
- Investments (118) (310) 310 - -
- Misc. items - - - - -
Net cash-flow (190) 150 (480) 1,544 2,799
+ Op. cash & bank bal. 565 375 525 45 1,589
Cl. cash & bank bal. 375 525 45 1,589 4,388
Source: Company, Anand Rathi Research

Fig 5 EV/EBITDA band
Source: Bloomberg, Anand Rathi Research
Fig 2 Balance sheet (`m)
Year-end: Mar FY13 FY14 FY15e FY16e FY17e
Share capital 5,034 5,034 5,034 5,034 5,034
Reserves & surplus 5,864 5,047 5,115 6,496 9,085
Net worth 10,897 10,081 10,149 11,530 14,118
Minority interest - - - - -
Total Debt 17,160 16,929 18,850 18,850 18,850
Def. tax liab. (net) 919 452 452 452 452
Capital employed 28,976 27,462 29,451 30,832 33,421
Net fixed assets 20,934 21,573 21,273 20,873 20,423
Investments 3,782 3,473 3,782 3,782 3,782
- of which, Liquid - - - - -
Net working capital 3,885 1,892 4,351 4,588 4,827
Cash and bank balance 375 525 45 1,589 4,388
Capital deployed 28,976 27,462 29,451 30,832 33,421
Net debt 16,785 16,404 18,805 17,261 14,462
WC days 24 21 20 25 23
Book value (`/sh) 22 20 20 23 28
Source: Company, Anand Rathi Research

Fig 4 Ratio analysis @ `74
Year-end: Mar FY13 FY14 FY15e FY16e FY17e
P/E (x) NA NA 548.2 20.7 11.0
P/CEPS (x) 49.7 NA 19.9 10.1 7.0
P/B (x) 3.4 3.7 3.7 3.2 2.6
EV/EBITDA (x) 23.1 44.8 14.0 8.1 5.7
RoE (%) (5.3) (7.8) 0.7 16.6 26.3
RoCE (%) 2.7 (2.0) 7.7 16.0 22.4
Fixed Asset turnover (x) 1.5 1.5 1.6 1.7 1.9
Dividend yield (%) - - - 1.0 1.8
Dividend payout (%) - - - 20.0 20.0
Interest exp./Sales 4.0 4.9 4.4 4.0 3.6
Debtors (days) 37 39 37 37 37
Revenue growth (%) 5.8 4.3 14.4 13.7 14.8
EBITDA growth (%) (1.9) (48.8) 233.9 68.3 35.6
PAT growth (%) 124.5 263.0 (103.1) 2,548.8 87.4
EPS growth (%) 124.5 263.0 (103.1) 2,548.8 87.4
Source: Company, Anand Rathi Research

Fig 6 Segment-wise break-up FY13 and FY14

Source: Company, Anand Rathi Research

20 October 2014 Prism Cement Subdued quarter; 2H to be better; Buy
Anand Rathi Research 3

Result Highlights
Fig 7 2QFY15 Actual vs Expectation
Quarterly results (YE: Mar) 2QFY15 2QFY15e % var 2QFY14 % yoy 1QFY15 % qoq
Sales (`m)
13,320 13,725 (2.9) 11,514 15.7 13,839 (3.7)
EBITDA (`m)
404 441 (8.3) -261 (254.9) 1,127 (64)
EBITDA margin (%)
3.0 3.2 (18) (2.3) 531bps 8.1 (510)
EBITDA per ton (`)
316 198 59.4 (181) (274.9) 601 (47)
Interest (`m)
643 648 (0.8) 614 4.7 648 (1)
Depreciation (`m)
330 366 (9.9) 433 (23.8) 366 (10)
Other income(`m)
105 100 5.1 100 5.1 85 25
PBT (`m)
(463) (473) (2.1) (1,208) (61.7) 197 (336)
Tax (`m)
(96) (142) (32.6) (58) 66.3 64 (249)
Adj. PAT (`m)
(368) (331) 31 (1,151) (128) 132 (87)
Rep. PAT (`m)
(198) (331) (40.3) 176 (212.5) 132 (249)
Source: Company, Anand Rathi Research.
Fig 8 Segment-wise performance
Segment (` m) 2QFY14 2QFY15 % yoy 1HFY14 1HFY15 % yoy
Revenue
-Cement 4,377 5,249 19.9 9,206 11,250 22.2
-TBK 4,520 5,224 15.6 8,378 10,124 20.8
-RMC 2,748 2,946 7.2 5,442 5,977 9.8
Total 11,644 13,419 15.2 23,025 27,351 18.8
Less Inter segment 50 42 (16.7) 91 85 (6.5)
Net sales 11,594 13,378 15.4 22,934 27,265 18.9

PBIT
-Cement (536) 340 (163) (534) 1,128 (311.4)
% of Sales (12.2) 6.5 1,871 (5.8) 10.0 1,582
-TBK 1,270 6 (99.5) 1,211 26 (97.9)
% of Sales 28.1 0.1 (2,799) 14.5 0.3 (1,420)
-RMC (22) (43) 91.5 (17) (41) 140.7
% of Sales (0.8) (1.5) (64) (0.3) (0.7) (38)
Total 713 303 (57) 660 1,112 68.5
Less: Interest & Finance 614 643 4.7 1,163 1,292 11.0
Less: Other Net unalloc. exp. (20) (47) 133.5 (37) (83) 121.1
PBT (After extraordinary) 118 (293) (348.3) (466) (97) (79.2)
Source: Company, Anand Rathi Research.
Key developments
Prism is planning a new cement plant at Kurnool District of Andhra
Pradesh, for which the mine development activities are in progress
while the project activities will be taken at an appropriate time. We
dont expect any work to be initiated in FY15-16.







Appendix

Analyst Certification
The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the
compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research
analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange
Board of India (hereinafter SEBI) and the analysts compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have
no bearing whatsoever on any recommendation that they have given in the Research Report.

Important Disclosures on subject companies
Rating and Target Price History (as of 18 October 2014)
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Date Rating
TP
(`)
Share Price
(`)
1 21-Jan-13 Hold 55 48
2 10-Jul-13 Buy 50 34
3 09-Oct-13 Buy 40 28
4 12-Feb-14 Buy 32 23
5 21-Mar-14 Hold 32 34
6 04-Apr-14 Hold 35 38
7 09-Jul-14 Buy 90 73









The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking
revenues.
Anand Rathi Ratings Definitions
Analysts ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described
in the Ratings Table below:
Ratings Guide
Buy Hold Sell
Large Caps (>US$1bn) >15% 5-15% <5%
Mid/Small Caps (<US$1bn) >25% 5-25% <5%

Anand Rathi Research Ratings Distribution (as of 18 October 2014)
Buy Hold Sell
Anand Rathi Research stock coverage (182) 61% 27% 12%
% who are investment banking clients 5% 0% 0%

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