Add Grasim Industries, target price Rs 1732: ICICI Securities

ICICI Securities has add call on Grasim Industries with a target price of Rs 1732. The current market price of Grasim Industries is Rs 1641.85. Time period given by analyst is one year when Grasim Industries Ltd. price can reach defined target.

Grasim Industries Ltd., incorporated in the year 1947, is a Large Cap company (having a market cap of Rs 108090.65 Crore) operating in Diversified sector.

Grasim Industries Ltd. key Products/Revenue Segments include Sale of Products, Other Operating Revenue, Scrap, Export Incentives, Power, Sale of services for the year ending 31-Mar-2021.



Financials
For the quarter ended 30-09-2021, the company reported a Consolidated Total Income of Rs 22817.58 Crore, up 13.02 % from last quarter Total Income of Rs 20189.29 Crore and up 22.67 % from last year same quarter Total Income of Rs 18600.72 Crore. Company reported net profit after tax of Rs 1921.00 Crore in latest quarter.


Investment Rationale
Grasim Industries’ (Grasim) Q3FY22 standalone EBITDA at Rs9.2bn (up 42% YoY) was broadly in line with consensus estimates. VSF EBITDA declined to Rs20/kg from Rs33/kg QoQ despite 9% QoQ increase in realisation owing to higher input costs of pulp, caustic, fuel etc. However, the same was offset by higher margins in caustic EBITDA margins which increased from 14.5% to 23.4% QoQ led by sharp 62% QoQ increase in ECU realisation. The company recently augmented VSF capacity by 37% to 810ktpa and chemicals capacity would increase by 33% to 1,530ktpa by Q1FY24, providing strong volume visibility over FY23-24E. Factoring stock price correction in its various holdings, the brokerage reduces target price to Rs1,732/sh (earlier Rs1,965/sh) based on 9x FY24E EV/E and assuming unchanged 50% holdco discount. Maintain ADD. Key risk: Lower demand / pricing in VSF / chemicals.

Promoter/FII Holdings
Promoters held 42.54 per cent stake in the company as of 31-Dec-2021, while FIIs owned 12.81 per cent, DIIs 14.71 per cent.