Daljeet Kohli deserves to be complimented for his brilliant stock-picking and timing. On 14th May 2014, Daljeet, with his usual soft-spoken confidence, recommended a buy on Prism Cement Ltd, when it was quoting at Rs. 50. He promised a price target of Rs. 60 for the stock.
Unfortunately, because the target price was modest and cement stocks were out of fashion, a lot of investors (including me) did not act on the recommendation.
That was a terrible tactical error because today, just 45 days later, Prism Cement is at Rs. 75, giving a fabulous gain of 40%.
Thereafter, on 9th June 2014, Prashant Jain, stock wizard with HDFC Mutual Fund, stormed the Prism Cement counter, and scooped up a massive chunk of 1.21 crore shares at Rs. 71.50 each.
This sent alarm bells ringing all around that something great is happening at Prism Cement.
This has now been confirmed by Daljeet’s “initiating coverage” report. In a detailed exposition, Daljeet and Santosh have explored the innards of Prism Cement and explained why it is still a great buy. The best part is that the dynamic duo have predicted a price target of Rs. 117 for the stock, which is a whopping 58% upside from the CMP.
Let’s look at their core reasoning:
“Since our Idea note dated May 5, 2014 (at then CMP of Rs 50), Prism Cements stock has delivered 48% absolute return. Demand revival leading to higher capacity utilization levels in FY15-16E (across all business segments) when coupled with cost saving initiatives/ operational efficiencies across all business segments, would translate to ~Rs 1.8 bn of cost savings. Accordingly, we expect EBITDA margins to improve from ~2.7% (in FY14) to ~9.7% (in FY16E). Using sum-of-the-parts based valuation methodology we arrived at revised PT of Rs 117. Given the 58% upside we maintain BUY on the stock.”
Daljeet also gave a brief talk when he summed up the three triggers for Prism Cement.
Now, the important aspect that you have to pay attention to is that cement stocks, which are highly cyclical and commoditized and which were so far shunned by investors, have suddenly became the rage amongst savvy investors.
Rakesh Jhunjhunwala showed the path when he gobbled up a massive 17.10L shares of Orient Cement in May 2014. Parag Parikh of PPFAS, who is one of the most level-headed and conservative investors you will ever find, put his money on The Ramco Cement. Both of these savvy investors are sitting on a huge pile of gains at present.
And now, Daljeet Kohli and Prashant Jain have put the spotlight on Prism Cement.
Speaking for myself, I am ruing having lost out on the first 40% gain in Prism. I am not inclined to miss out on the second mega-gain which Daljeet has promised. So, I have grabbed a nice little chunk of the stock and am game for more on every dip. What I am eagerly waiting for is to see how soon Daljeet’s target price is met. Any guesses?