Prism Cement: Momentum back

ANALYSTS' CORNER

IL&FS Investsmart maintains its 'buy' recommendation on Prism Cement. The company has posted excellent results for the quarter with a q-o-q jump of 71 per cent in EBIDTA.

Riding mainly on the back of strong volume growth of 22 per cent and 37 per cent, y-o-y, in the last two months, the company has made a turnaround to post a profit of Rs 5.4 crore compared with a loss of Rs 1.3 crore, a quarter ago.

While most cement stocks have rallied strongly over the past two quarters, Prism Cement has underperformed by a huge margin mainly owing to its poor financial performance.

The report believes that the growth momentum of the company is back. With the trend of declining consumption reversing in its key markets, the company too has shown strong rebound in volume growth over the past two months.

Its cement despatches grew 21.7 per cent and 36.5 per cent in the last two months of the quarter to post 14.3 per cent growth for the quarter.

Bharat Heavy Electricals: Rich orders

Merrill Lynch recommends a 'buy' on Bharat Heavy Electricals. The company is likely to have two big orders in Q4 FY06, and visibility is expected to be improved. The orders, worth Rs 3,500 crore, are expected by March this year.

Also, the government has floated tenders for its proposed mega projects, indicating an improved order pipeline. Besides, the largest export order from Sudan "" a 500 MW oil-based power project worth Rs 2,000 crore "" is on its way.

This is an order the company is likely to win. The government has sanctioned the line of credit for the funding. Also, NPC has signed PPAs with Karnataka and Kerala.

The report believes that this should aid financial closure of the project and payment of advance to BHEL for it to accept the order.

The Indian government has issued tenders for 2x4GW mega projects for bidding by the IPPs. The report sees increased visibility of power capex.

JB Chemicals: new strategy

ASK Raymonds James, in its report, states that JB Chemicals has relatively weak domestic formulations business (highly concentrated), but strong exports to Russian and CIS markets (close to $50 million or 45 per cent of sales).

Apart from strengthening these two businesses, the management is active in developing a new stream of revenues from contract research and manufacturing services, and changing its strategy for the US markets.

The management expects these initiatives to ensure at least 20 per cent growth over the next few years. Concurrently, the company is also trying to improve various internal processes and practices.

It recently placed 5 per cent of equity for Rs 45 crore with a private equity investor. Many of these changes are driven by an increased involvement of the second-generation management.