Prism Johnson Limited - Commercial Paper Programme Rating Reaffirmed

Crisil Ratings Limited ('CRISIL') has re-affirmed its 'CRISIL A1+' rating on the Commercial Paper programme of Prism Johnson Limited (PJL).

The rating reflects the healthy business risk profile supported by PJL's position as a prominent cement player in the central region, its established presence in the domestic ceramic and vitrified tiles industry along with being one of the leading players in the ready-mix concrete (RMC) business and structural improvement in the operating efficiency of the cement and tiles divisions. The rating also factors in the healthy financial risk profile and adequate liquidity maintained. These strengths are partially offset by susceptibility to fluctuations in input costs and realisations, cyclicality in the industry and exposure to intense competition.

During the first nine months of fiscal 2023, the consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) margin moderated to 4.1% compared to 8.8% in the corresponding period of the previous fiscal due to decline in profitability of the cement division owing to rise in petcoke/ coal prices and planned shutdown in some plants during the third quarter. Operating profitability was also lower in the tiles division due to rise in gas prices. For fiscal 2024, CRISIL Ratings expects EBITDA margin to improve to 7.5-8.5% driven by cost reduction in the cement division with decline in power and fuel cost on account of lower input prices and benefit of investments made in green energy in cement division. Profitability of tiles division is also expected to improve with expected reduction in gas prices next fiscal.

Over the past five years, operating performance has seen significant improvement across divisions, as indicated by the cement division's EBITDA per tonne of Rs 800-1,000 during fiscals 2019, 2020 and 2021, compared to Rs 500-700 per tonne in fiscals 2017 and 2018. However, with continuous rise in petcoke / coal prices, operating profitability declined in fiscal 2022 and first nine months of fiscal 2023 with EBITDA per tonne at Rs 709 and Rs 434, respectively. The HR Johnson (HRJ) division after witnessing a turnaround in fiscals 2021 and 2022 as seen in EBITDA margin improving to double digits (barring quarters impacted due to the pandemic) from 3-4% during fiscals 2018 to 2020 moderated in the first nine months of fiscal 2023 due to rising gas prices.

The decline in operating performance and the resultant reduction in cash accrual consequently moderated the financial risk profile during fiscals 2022 and 2023 as seen in consolidated net debt (gross debt less cash and equivalents) to EBITDA ratio declining to 2.4 times as on March 31, 2022 against 1.8 times a year earlier However, the total debt level has remained flat and increase in net debt to EBITDA ratio is on account of lower profitability. CRISIL Ratings expects the net debt to EBITDA ratio to further moderate to 3.5-4.0 times in fiscal 2023 due to lower operating profitability. Net debt to EBITDA ratio is expected to improve to below 2 times fiscal 2024 onwards on account of higher operating profitability and repayment of debt obligation. Liquidity remains strong, with cash and equivalents of approximately Rs 190 crore as on February 14, 2023, along with a policy to prepay or refinance a large part of the term debt a year in advance.

Shares of Prism Johnson Limited was last trading in BSE at Rs. 105.85 as compared to the previous close of Rs. 103.40. The total number of shares traded during the day was 68925 in over 1194 trades.

The stock hit an intraday high of Rs. 108.20 and intraday low of 103.50. The net turnover during the day was Rs. 7322432.00.

Source : Equity Bulls

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