Buy Grindwell Norton, target price Rs 1986: ICICI Securities

ICICI Securities has buy call on Grindwell Norton with a target price of Rs 1986. The current market price of Grindwell Norton is Rs 1649.45. Time period given by analyst is one year when Grindwell Norton Ltd. price can reach defined target.

Grindwell Norton Ltd., incorporated in the year 1950, is a Mid Cap company (having a market cap of Rs 18321.39 Crore) operating in Industrial Consumables sector.

Grindwell Norton Ltd. key Products/Revenue Segments include Abrasives, Ceramics & Plastics, Service Income, Others, Other Operating Revenue for the year ending 31-Mar-2021.



Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 570.43 Crore, up 9.89 % from last quarter Total Income of Rs 519.09 Crore and up 9.44 % from last year same quarter Total Income of Rs 521.24 Crore. Company reported net profit after tax of Rs 90.19 Crore in latest quarter.

Investment Rationale
Grindwell Norton (GWN) reported a healthy ~10% YoY revenue growth in Q4FY22 to Rs5.6bn, marginally ahead of our estimate of Rs5.4bn. Revenue increase was led by 34% YoY growth in ceramics & plastics while the abrasive segment declined 0.8% YoY. Lower RM/sales led to higher than expected EBITDA, which expanded 7.4% YoY to Rs1.2bn (I-Sec: Rs962mn). However, higher overheads led to EBITDA margin contraction of 44bps YoY to 22%. APAT grew 7% YoY to Rs887 (I-Sec: Rs743mn). For FY22, revenue / EBITDA / APAT grew at commendable rates of 23% / 24% / 23% respectively. The brokerage upgrades the stock to BUY, based on resilience shown in the tough macro environment, pricing power of products, and recent correction in stock price. It marginally reduces SOTP-based TP to Rs1,986 (from Rs2,084 earlier).

Promoter/FII Holdings
Promoters held 58.3 per cent stake in the company as of March 31, 2021, while FIIs held 4.5 per cent, DIIs 36.3 per cent and public and others 21.3 per cent.