Hold Prism Johnson, target Rs 102: Anand Rathi

Anand Rathi has given a hold recommendation on Prism Johnson with a target price of Rs 102.

Shares of Prism Johnson traded at Rs 90.95 around 1:40 pm on 10 July, 2019. The brokerage has set a one-year horizon for the stock to hit the target price.

Investment rationale-

Improve operating efficiency
The cement division’s performance will further improve on account of savings of Rs 30-40/ton in power costs on the commissioning of the WHR and solar plants and increase in revenue through a greater proportion of trade sales.

Despite decent volume growth, the TBK division has been suffering losses. Thus, management is now focusing on improving utilization, cutting costs and increasing market share.

The RMC division’s profitability will improve with better utilisation and efforts to reduce fuel costs.

Capex plans
On the 22MW WHRS commissioning, expected by Jun FY21, savings would be Rs 100/ton. On the 15MW solar plant commissioning, expected by Q2 FY20, savings would be Rs 140-150/ton.

For each of the next three years, budgeted maintenance capex would average Rs 200 crore. The company may set up a line in either Kurnool or Satna after FY22 according to the market scenario.

"We expect Ebitda to register a 16 per cent CAGR over FY19-21, and a cement Ebitda/ton of Rs 823," said the brokerage.

Outlook and valuation
The company repaid nearly Rs 70 crore debt; hence, standalone debt shrank to nearly Rs 1,410 crore in FY19.

"With the expected improvement in operating performance and the cement division’s greater utilisation, we expect overall revenue to clock an 8 per cent CAGR over FY19-21, and PAT, 33 per cent," the brokerage said.

With no clear signs of improvement in the TBK and RMC divisions, the brokerage retained hold recommendation on the stock, with a target price of Rs 102.