Hold S Chand and Company; target of Rs 125: Prabhudas Lilladher

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Prabhudas Lilladher's research report on S Chand and Company

We cut our revenue/PAT estimates by 32%/45% for FY20 and 27%/31% for FY21 given unrelenting focus on FCFF generation by engaging with quality channel partners. Though channel cleansing is expected to eliminate dealers/distributors with elongated payment cycle we believe realigning credit terms is a long drawn process and growth could suffer in the interim. While New Education Policy can act as a growth kicker (2nd hand books go out of the system) given the uncertainty in time-line we remain apprehensive of any immediate benefits. We believe S Chand 3.0 program aimed at improving the working capital efficiency & lowering operating costs is a step in the right direction but implementation challenges galore.

Outlook

We value the stock at 8x FY20E EPS of Rs15.6 and arrive at a TP of Rs125 (earlier Rs234). Maintain HOLD.

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