Add Grasim Industries, target price Rs 1460: ICICI Securities

Grasim Industries Ltd, incorporated in the year 1947, is a Large Cap company with a market cap of Rs 89977.76 Crore, operating in diversified sector.

Grasim Industries Ltd’s key Products/Revenue Segments include Sale of Products, Other Operating Revenue, Export Incentives, Scrap, Sale of services, Power and Rent for the year ending 31-Mar-2020.

Investment Rationale

Grasim Industries’ Q4FY21 standalone EBITDA at Rs 8.1 billion (up 2.5x YoY) was broadly in-line with ICICI Securities/consensus estimates led by sharp improvement in VSF (Viscose Staple Fiber) profitability. VSF EBITDA improved to Rs 37/kg from Rs 27/kg QoQ as realisation improved from Rs 120/kg to Rs 144/kg QoQ. However, the spread between VSF and pulp is expected to normalise with increasing pulp prices and some softness in VSF prices.

Factoring better VSF profitability, ICICI Securities raise its FY22-23E EBITDA 4-6 per cent and coupled with the recent run-up in stock prices of its various holdings, ICICI Securities increased its target price to Rs 1,460/share (earlier: Rs 1,330) based on 7x FY23E EV/E. Key risk for the company includes lower demand/pricing in VSF/chemicals.

Financials

For the quarter ended 31-03-2021, the company has reported a Consolidated Total Income of Rs 24529.53 Crore, up 14.94 per cent from last quarter Total Income of Rs 21341.10 Crore and up 21.59 per cent from last year same quarter Total Income of Rs 20174.61 Crore. Company has reported net profit after tax of Rs 2533.30 Crore in latest quarter.

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