Buy Prism Johnson. target price Rs 46: Anand Rathi

Anand Rathi has given a buy rating to Prism Johnson with a target price of Rs 46.

According to the brokerage, the company has not opted for a moratorium with any banks/FIs for principal or interest payments. It did not opt for a moratorium on TDS and made all payments in time. It intends to opt for the lower tax regime. No tax provision for the year has been made as it would be entitled to set-off brought-forward losses and no tax would be required to be paid on book profits. It has recognised the consequential impact by reversing deferred-tax assets.

Q4 revenue (overall) was down 18% year on year to Rs 13.7 billion. The cement division’s revenue declined 16.2% year on year to Rs 6.7 billion on the 14% year on year fall in volumes to 1.51m tons mainly due to lost sales in March’20 because of the lockdown and the steep fall in clinker sales, says the brokerage. Further, realization/ton (of the cement division) slipped 2.9% year on year to Rs 4,412. Premium-product volumes continued to rise and constituted 22% of overall cement volumes in FY20 (18% in FY19).

Investment Rationale

The company is likely to scale down capex, but continue with plans of the additional 12.5MW solar and WHRS for cement and the 5MW solar plant for the TBK division with some delays. It expects demand for rural and individual housings to return to normal and pick up pace faster than urban demand. The brokerage has upgraded its rating to a buy, with a lower target price of Rs 46 on a sum-of-parts valuation.

Risks: Rise in petcoke/diesel prices; extension of the lockdown.

Financials

For the quarter ended March 31, 2020, the company has reported consolidated sales of Rs 1463.15 crore, up 1.07 per cent from last quarter Sales of Rs 1447.73 crore and down -15.58 per cent from last year's same quarter Sales of Rs 1733.08 crore. The company reported net profit after tax of Rs -46.67 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 74.87 per cent, while FIIs held 3.70 per cent, DII held 7.61 per cent, and public and others 13.82 per cent stake in the company as of March 31, 2020.