UPDATE: J.P. Morgan Downgrades Axiall Corp. to Neutral, Lowers PT on Multiple Challenges Ahead

In a report published Wednesday, J.P. Morgan analyst Jeffrey J. Zekauskas downgraded the rating on Axiall Corp. AXLL from Overweight to Neutral, and lowered the price target from $53.00 to $46.00. In the report, J.P. Morgan noted, “We rate Axiall Corp Neutral. The acquisition of the PPG assets effectively integrates Axiall fully into its chlorine and caustic requirements and enlarges its export capabilities. PPG probably operated its chloralkali assets at suboptimal rates of utilization as it did not have the vertical integration that would enable it to find a home for both its chlorine and its caustic soda. The combined entity generates substantial free cash flow on a sustainable basis. We forecast about $650M of EBITDA for the combined entity in 2013 and $685M for 2014. The costs of integration and year-one working capital additions should mute AXLL's overall free cash flow to $170 million, or $2.55 per share, in 2013 representing 6% of the current share price. We forecast a free cash flow yield of 10.3% in 2014, or $4.30/share.” Axiall Corp. closed on Tuesday at $41.86.