Prism Cement 27% Upside ENAM 2011 TOP Pick

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Prism Cement 27% Upside ENAM 2011 TOP Pick


Going up the value chain
● India’s leading integrated building material player with a robust business model generating FCF and
sustainable competitive advantage. Presence in Central & Eastern Region where cement demand has
grown by 19% & 17.5% respectively vs. Industry growth of 10.6% in FY 2010. Robust demand
& superior realization to benefit from the next cement up‐cycle by leveraging on its recently concluded
capex taking its capacity to 6.6 mn tonnes.

● Significant ease in input cost (FY 13 onwards): Captive coal mine + reduced power tariff rates
(power surplus due to est.~ 17,000 MW), to cause quantum leap in profitability in a scenario of
increasing input cost. We have not captured the benefits arising from coal mine in our valuations.

● Synergies across divisions ‐ Acquisition of RMC + TBK business with ROCE’s of over 15% would
provide a strategic route to market for cement business whose extensive network can be used to further
nurture RMC & TBK businesses.
● Prism is available merely at 4x EV/EBITDA & 6x its FY13E earnings. Capturing the value chain of all the
business segments through our SOTP valuation, we have arrived at a price target of Rs. 66 per share.