Prism Cement Ltd stock may give good returns in a year’s time

Prism Johnson Ltd (PJL) is one of India’s leading integrated building material company manufacturing products from cement, ready mixed concrete, tiles and bathroom sectors. The cement division is in the name of Prism Cement Ltd and is a prominent player in Central India catering mainly to markets in Eastern Uttar Pradesh, Bihar and Madhya Pradesh. The company has an installed capacity of 5.6 mtpa in Madhya Pradesh working at a stable demand and supply scenario in that region. With demand growing from the real estate and infrastructure sectors, the company plans to increase the cement capacity by 0.90 mtpa to 6.5 mtpa by June 2022 and increase further to 7.5 mtpa by September 2023. The key focus areas for Prism Cement during the next two years are to increase the volume share of its premium products viz. Duratech and Champion Plus and expand the network substantially. The company posted strong operating and financial metrics for the FY2020-21 with EBITDA growing from Rs 889 per ton for FY20 to Rs 962 per ton for FY21. The cost per ton decreased from Rs 3627 in FY20 to Rs 3482 in FY21 due to the company selling cement at ex-depot basis with most customers bearing the freight cost from the particular depot to their desired location. While this had no material impact on the EBITDA per tonne, this led to decline in both the gross realisation and outward freight cost of Rs 109 per ton for FY21. H & R Johnson is a division of PJL with a wide product range of tiles, sanitary ware, bath fittings, faucets, engineered marbles and quartz. All the products are sold under four strong brands such as Johnson, Johnson Maronite, Johnson Parselano and Johnson Endura. The company has been in operation since 1958 and is amongst the leading ceramic companies of the country. It has 11 manufacturing plants spread across the country along with two faucet manufacturing facilities at Jammu & Kashmir and Himachal Pradesh. Led by strong volume growth and sustainable cost optimisation, H & R Johnson posted strong operating performance with revenue from sanitary ware and bath fittings growing 11.9% y-o-y in FY21. A string of companies were amalgamated during the year with PJL simplifying the group structure coming under a common management and eliminating multiple operating companies structure. The consolidation has led to better, efficient and economical cost management with optimum utilisation of resources. The outlook for Prism Johnson looks quite promising as the cement and tile production capacity expansion will be met primarily through internal accruals. Analysts tracking cement and home improvement companies are quite bullish on Prism Cement Ltd and expect the stock currently quoting at Rs 133 to appreciate further in the next one year. Investors are suggested to check with their financial advisors and take their reasonable investing decision.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.