Grasim Industries Ltd. share price target

Grasim is the flagship company of the Aditya Birla Group, and is one of the...

Though the company has taken steps towards cost optimization along with calibrated Capex in FY21, and is focusing on value added products, we remain cautious on the stock and downgrade our rating to HOLD...

Consolidated profit after tax for Q4 FY20 stood at Rs 1,506 crores against Rs 1,144 crore in the year ago period. Revenue, however declined by 11% to Rs 19,901.54 crores. OPM of the company stood at 14.21% compared to 20.37% in Q4FY19. As a result operating profits reported profit of Rs 2828.91 crore compared to profit of Rs 4568.06 crore. Other income fell 33% to Rs 300.13 crore. Interest cost increased by 2% to Rs 1712.47 crore. Depreciation...

Revenue declined 20% YoY to INR21b in VSF and 24% YoY EBITDA declined 56% YoY to INR3.9b (in-line) due to lower prices, with the margin contracting 7.6pp YoY / 0.1pp QoQ to 9.1%. Lower demand, higher imports, weak global prices, and new domestic capacities led to weaker Chemicals The company has put expansion plans on hold due to weak demand. Given Grasims conglomerate business structure, we value it on an SOTP EV/EBITDA, b) UltraTech at a 60% holding company discount to target price, and c) other listed investments (AB Capital, Vodafone Idea, Hindalco, and Aditya Birla Fashion) at a 60% holdco discount to market prices. Lower demand, higher imports, weak global prices, and ramp-up in new domestic capacities by ~620ktpa resulted in weaker The Epoxy business EBITDA improved YoY on lower input prices. Century Cement and the Nathdwara plant reported improvement in realization, Operating cost (Q4FY20) declined on a YoY basis; Logistics was down 3% and Consolidated net debt reduced by INR52b to INR168.6b in 4QFY20.

Grasim Industries Limited's (Grasim's) reported marginally better-thanexpected Q4FY2020 results. Its standalone net revenue declined 19% y-o-y (down 4.1% q-o-q) as both the viscose and chemical divisions were affected by loss of sales during last ten days of March 2020 (COVID-19 led nationwide lockdown) along with continued weak pricing environment. OPMs of the viscose division were 75 bps higher q-o-q than chemicals led by lower pulp prices. Adjusted OPM of the chemicals division declined 374 bps q-o-q led by lower user demand, higher imports and domestic capacity additions. Hence on a blended basis, OPM remained almost flat q-o-q at...

Lukewarm performance across all segments except FinServ Revenue in Q3FY20 declined 1.4% YoY to Rs. 19,205cr, impacted by slowdown across all the segments. Company's Viscose Pulp business dropped to Rs. 2,194cr (-16.1% YoY), largely attributable to soft domestic VSF prices amidst declining global prices owing to excess capacity addition of 1.3mn in Asia alongside the impact of US-China trade war on global demand. Cement business fell 0.9% YoY to Rs. 10,354cr, on lower sales volume of 20.9MT (21.8MT in Q3FY19), with weak macroeconomic factor and construction ban in NCR region. Chemical business fell 12.6% YoY to Rs. 1,362cr, due...

2019 as against net profit of Rs 948.11 crore in Q3 December 2018. Profit before tax (PBT) for Q3 December 2019 stood at Rs 1454 crore, down by 16.82% from Rs 1748 crore in Q3 December 2018. EBITDA declined 4.78% to Rs 2968 crore in Q3 December 2019 as against Rs 3117 crore reported in Q3 December 2018. Profit after tax (PAT) for Q3 December 2019 stood at...

Grasim Industries Ltd started as a textiles manufacturer and later diversified into viscose staple fibre (VSF), cement and chemicals. The products and services of the company include Viscose staple fibre (VSF), Grey cement, White cement, Fertilizers, Chemicals, Mining, Fatty Alcohol/Fatty Acids, Insulators, Software, BPO, Finance and Insurance, Retail, Sponge iron and Textiles. The company also in the...

We expect RoE to be weak at ~3% in the next two years due to (a) margin pressure in both VSF and Chemicals and (b) higher depreciation and interest cost due to capacity addition. As a result, EPS is expected to decline over Given GRASIMs conglomerate business structure, we value it on an SOTP basis. Revenue and net profit after minority interest for 3QFY20 are at INR43.26b FY19 was a peak year for VSF margins. However, we have seen significant capacity addition in both VSF and Chemicals, which led to sharp contraction in margins in the past few quarters. Our target price values (a) the standalone business (fiber, chemicals, etc.) at 10x FY21E P/E, (b) UltraTech at 60% holding company discount to target price and (c) other listed investments (AB Capital, Vodafone Idea, Hindalco, Aditya Birla Fashion) at 60%.

Grasim Industries Limited's (Grasim) stock has risen by ~10% over the fortnight, led by two key developments in the telecom sector affecting VIL (Grasim holds 11.6%). Firstly, the government provided benefit of Rs. 23,920 crore to VIL through deferment of spectrum payment for FY2021FY2022. However, the Committee of Secretaries (CoS) set up to suggest relief measures for the telecom sector has been disbanded, which has put expectations of further relief in abeyance as of now. Secondly, the three major players in telecom have decided upon tariff hike from December 2019, which is seen as a sign of bottoming out of ARPUs for...