Recommendation From Cement & Cement Products Sectors

This section gives a recommendation of a stock having stock margin padding price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon

Prism Johnson 

BSE Code: 500338
CMP: Rs 87.90
FV: Rs 10
BSE Volume: 13976 

CEMENTING A STRONG BOND OF GROWTH 

HERE IS WHY Improving financial trend Diversified business model Demand recovery across segments 

Prism Johnson Limited (PJL) is a diversified building materials company. The cement division manufactures under the brands Champion, Champion Plus and Duratech. HRJ is the only entity in India to offer end-to-end solutions of tiles, sanitary ware, bath fittings and engineering marble and quarts. The RMC division manufactures ready-mixed concrete and has forayed into the aggregates business and operates large quarries and crushers. 

On the standalone quarterly front, the total revenue from operations rose to Rs 1,335.27 crore in Q2FY19 from Rs 1,165.28 crore in Q2FY18, thereby rising 14.58 per cent. EBITDA increased to Rs 80.31 crore in Q2FY19 from Rs 40.45 crore in Q2FY18, posting an impressive growth of 98.54 per cent. Consequently, the net profit climbed to Rs 7.04 crore in Q2FY19 from a net loss of Rs 23.87 crore in Q2FY19. Operating profit margin soared to 3.66 per cent in Q2FY19 versus 1.04 per cent in Q2FY18. EPS rose to Rs 0.14 per share in Q2FY19 from a negative EPS of Rs 0.47 in Q2FY18. 

On the consolidated annual front, the revenue from operations rose to Rs 5,641.37 crore in FY18 from Rs 5,563.18 crore in FY17, thereby rising 1.40 per cent. EBITDA climbed to Rs 442.23 crore in FY18 from Rs 356.67 crore in FY17, posting a growth of 23.98 per cent. Profit for the year stood at Rs 55.00 crore in FY18 from Rs 14.25 crore in FY17, registering a whopping growth of 285.96 per cent. EPS rose to Rs 0.84 in FY18 from a negative EPS of Rs 0.04 in FY17. Net cash flow from operating activities dropped to Rs 586.62 crore in FY18 from Rs 675.61 crore in FY17, thereby plummeting 13.17 per cent. 

On the valuation front, the return on capital employed (RoCE) improved to 10.6 per cent in FY18 from 8.6 per cent in FY17. Return on equity (RoE) stood at 5.10 per cent, while the return on assets (RoA) stood at 1.04 per cent in FY18. It has a dividend yield of 0.56 per cent. The company is currently trading at a P/E ratio of 13.35x on its TTM earnings as against the industry P/E multiple of 23.87x. 

For the quarter ended September 2018, the cement division reported volume growth of 20 per cent YoY, while its EBITDA more than doubled to Rs 79.2 crore in Q2FY19 from Rs 37.3 core in Q2FY18. The tile volumes de-grew by 2 per cent in H1FY19 due to a transport strike in July and the floods in Kerala. The division is focused on improving utilisation levels and operating performance. PJL's RMC division registered 9 per cent revenue growth YoY due to the upsurge in real estate and infrastructure sector, particularly road construction. 

The company management expects the recovery in the HRJ and RMC division to continue, considering that PJL has reorganised the related sales team into four separate verticals for each brand to generate higher sales volume, scaled up its marketing activities by strengthening the distribution network (six new display centres in the last one year; 14 more in the pipeline), introduced new products and has implemented strict control on working capital and cost optimisation. By virtue of these factors, we recommend our reader-investors to BUY this stock.