CMP:
Rs. 2504.85; Accumulate at Rs. 2480 - Rs. 2505 current levels.
Short Term Target : Rs. 2800; Medium to Long term Target: Rs. 3060; STOP LOSS – Rs. 2281.00; Market Cap: Rs. 22,992.79 Cr; 52 Week High/Low: Rs. 3510.00 / Rs. 2105.65.
Short Term Target : Rs. 2800; Medium to Long term Target: Rs. 3060; STOP LOSS – Rs. 2281.00; Market Cap: Rs. 22,992.79 Cr; 52 Week High/Low: Rs. 3510.00 / Rs. 2105.65.
Total
Shares: 9,17,93,094 shares; Promoters : 2,34,28,918 shares –25.52 %; Total
Public holding : 6,83,64,176 shares – 74.48 %; Book Value: Rs. 1102.68; Face Value: Rs. 10.00; EPS: Rs.
128.46; Dividend: 225.00 % ; P/E: 19.49 times; Ind. P/E: 13.86;
EV/EBITDA: 4.93.
Total
Debt: 8,427.34 Cr; Enterprise Value: Rs. 31,192.68 Cr.
GRASIM INDUSTRIES: GRASIM IND was incorporated in
1947 and is based in Gwalior, Madhya Pradesh, India. The company was earlier
known as Gwalior Rayond Silk Mfg (Wvg). Co. Ltd and changed its name to Grasim
Industries on 22 July 1986. Grasim Industries is a flagship company of Aditya
Birla Group. Grasim Industries Limited engages in the manufacturing and
sale of Viscose Staple Fibre (VSF), cement, chemicals, and textiles worldwide.
The company’s products include grey cement, white cement, chemicals, sponge
iron, and textiles. The company’s VSF is a biodegradable fibre used in
apparels, home textiles, dress material, knitted wear, and non-woven
applications; and cement products comprise grey and white cement, and ready mix
concrete. The company’s chemical products consist of rayon grade caustic soda;
stable bleaching powder used in water purification, sanitation, and as a
bleaching agent; poly aluminum chloride used in water treatment, paper sizing,
and effluent treatment; and chloro sulphonic acid used in vinyl sulphate, the
raw material for dyes and intermediates, saccharin, drugs, and pharmaceuticals.
The company’s textile products include fabrics, synthetic yarns, worsted dyed
yarn spun, and branded suiting under the brand names Grasim and Graviera. Through
its subsidiary, Grasim Industries Limited sells its products through a network
of 50 showrooms, as well as through 200 wholesalers and 25,000 multi-brand
outlets. In August 2011 Grasim Industries acquired Aditya Birla Power Ventures
Ltd and on March 2012 it acquired 33.33 % interest in Aditya Group AB, Sweden.
Grasim industries is locally compared with ACC, Jaiprakash Associates ltd,
Ultratech Cement ltd, Century Textiles and Industries ltd and globally compared
with Lafarge Cement Zambia PLC, Oman Cement Company, Bamburi Cement, Holcim
Liban, Kuwait Cement Company
Investment Rationale:
Grasim Industries is India’s one the best and biggest VSF & Cement Company.
Phase I of the
Harihar captive Power Plant of 20 MW, Karnataka, and expansion of 18,250 tons
per annum was commissioned in Sep’12; phase II of similar capacity in May’13.
The Greenfield project at Vilayat, Gujarat, (120,000 tons) will be commissioned
in 3QFY14 in a phased manner. A major revamp of the Nagda plant has begun, to
be completed in phases over the next two years. The fresh capacities and
upcoming projects would support strong volume growth, starting 2HFY14. Company has commissioned 3.3MT
clinkerisation plant in Karnataka. It had already commissioned clinker unit of
3.3MT at Chattisgarh and a grinding unit of 1.55MT at Hothi, Maharashtra during
Q4FY13. Cement grinding capacity will be operational in phases in line with
clinker production. Company has further sanctioned a capex of Rs 21 bn towards
setting up of grinding units, modernization and RMC plants across the country.
Company expects volume increase to reflect from H2FY14 from the recently
commissioned capacities. Looking at the capacity
expansion underway in both cement as well as the VSF segment, a boost in
revenue may be seen from volumes. The cement segment of Grasim is through
Ultratech where Grasim hold 60.3 % stake. The capacity in Ultratech is seen to
grow from 52.5 Million Tonnes Per Annum to 54.5 MTPA during June 2013 quarter
while 10 MTPA capacity expansions are underway. The muted demand and
realisation in Cement is likely to get a boost once the monsoon season gets
over. The global industry scenario seems to be improving. The demand supply
imbalance in China and high cotton inventory continued to impact VSF
realisation with sharp decline in May 2013 but stabilisation was seen in July
onwards. With the commissioning of Harihar Expansion the production was up by 5
% on year on year basis. The Kharach Unit operated at low capacity for 45 days
due to repairs of water canal supplying canal by state government but with the
new reservoir at Nagda ensured no loss of production. Due to depreciation of
Rupee the realisation remained under pressure in line with the global trend.
Outlook and Valuation:
Grasim
Industries is well placed to take advantage of capacity expansion in both its
segments. It is expected that government may increase spending before election
which will in tuen boost the demand from rural India. The water scarcity
problems that had hit the demands in Karnataka and Maharashtra are expected to
get resolved. The subdued stock prices here offers a good opportunity for the
investors to enter the stock and given the likely recovery in the cement
business and with improving balance sheet the stock somewhat provides a
defensive opportunity in this volatile markets. The 1QFY14 VSF volumes
went up 0.7 % YoY, the realisations was at Rs. 126/kg which saw a dip of 8.3 %
YoY. Realisations were hit by a demand-supply imbalance in China and depressed cotton
prices due to huge cotton inventories. Despite the Kharach unit operating at
low capacity for 45 days due to water supply issues, production rose 5 % YoY. PAT
slid 17 % YoY but was higher than expected due to a lower tax charge of 6.6 %
of PBT. Grasim expects prices in the near term to be influenced by the trend in
cotton prices and recovery in the global economy mainly from China and US. The
long-term outlook is bright on a rising population, developing-markets
consumption and a preference for comfort fabric leading to a rise in demand for
quality cellulosic fibre. Management expects range-bound VSF prices and margins
in the near term. Expect profitability in the rest of FY14 to be better, led by
expansion at Harihar, Vilayat, and a marginal recovery in VSF prices. At current price
of Rs. 2504.85, the stock is trading at 21.97 x P/E for FY14E and company could report an EPS of Rs. 114 for FY14E and Rs. 135 for FY15 estimates. One can buy GRASIM IND Limited
with a target price of Rs. 3060.00 for Medium to Long term investment. And for the shorter term the target could be Rs. 2800
SOTP Valuation :-
Business Division
|
Value Per Share (in. ₹ )
|
---|---|
VSF Division
|
374.15
|
Value of Chemical Division
|
108.04
|
Less :NET DEBT (standalone)
|
(173.76)
|
TOTAL
|
308.43
|
60.3 % in Ultratech @20% holding disc.
|
2534.34
|
Investments @20% holding disc.
|
216.56
|
TOTAL VALUE PER SHARE
|
3059.33
|
KEY FINANCIALS | FY12 | FY13 | FY14E | FY15E |
---|---|---|---|---|
SALES (₹ Crs) | 4,876.30 | 5,181.40 | 5,546.00 | 6,635.80 |
NET PROFIT (₹ Cr) | 1,177.60 | 1,021.60 | 1050.60 | 1,234.80 |
EPS (₹) | 128.00 | 111.00 | 114.00 | 135.00 |
PE (x) | 19.90 | 22.90 | 22.30 | 19.00 |
P/BV (x) | 2.60 | 2.30 | 2.10 | 2.00 |
EV/EBITDA (x) | 18.70 | 22.70 | 22.20 | 15.90 |
ROE (%) | 13.70 | 12.80 | 10.00 | 10.80 |
ROCE (%) | 10.60 | 7.80 | 6.50 | 8.10 |
*As the author of this blog I disclose that I do hold GRASIM INDUSTRIES LTD in my investment portfolio.
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ReplyDeleteAditya birla nuvo got merged with Grasim on 6 July 2017 - 10 Shares of ABNUVO received 15 Shares of Grasim
10 ABNUVO to get 21 shares in financial business
on 19 JULY Aditya birla capital got demerged in ratio of 7 Aditya Birla Capital for every 5 Sh of Grasim
100 Sh of Grasim sh holders will get 140 shares of Aditya Birla Financial Ltd
ReplyDelete100 ABNUVO = 150 Grasim + 210 ABFL