Hold Grasim Industries Ltd For Target Rs. 2,777 By Choice Broking Ltd

Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
Grasim Industries Ltd. reported standalone revenue of INR76,233mn for Q2FY25, marking an 18.3% YoY growth and a 10.6% QoQ increase, driven by robust performance in Financial Services, Cellulosic Staple Fibre, and Specialty Chemicals segments. However, EBITDA declined to INR3,252mn, reflecting a 45.2% YoY and remaining flat QoQ, primarily due to ongoing investments in the Paints business. The EBITDA margin contracted to 4.3%, down by 495 bps YoY and 45 bps QoQ. The company recorded a PAT of INR7,209mn, a 9.3% YoY decline, though it improved QoQ after being negative in Q1FY25, supported by higher other income in Q2. On a YoY basis, PAT was impacted by increased interest and depreciation expenses stemming from investments in the Building Materials and Renewables businesses.
* Focused on Paint and Ecommerce Business: The Paints business, operated under the Birla Opus brand, continues to perform in line with Grasim Industries' expectations. Utilization levels at the 3 plants commissioned in Q1FY25—Ludhiana, Panipat, and Cheyyar—are steadily ramping up on a month-on-month basis. Trial runs have also commenced at 2 additional plants in Chamarajanagar, Karnataka, and Mahad, Maharashtra. The company's sixth plant, located in Kharagpur, West Bengal, is expected to become operational in Q4FY25E. Geographic expansion and dealer onboarding efforts are progressing as planned, with the company targeting a high single-digit market share in the Indian decorative paints market by year-end. Grasim's B2B e-commerce platform, Birla Pivot, is witnessing gradual revenue growth and is on track to achieve $1 billion in revenue within the next three years. The business has expanded its presence to over 375 cities across 26 states and union territories in India. Its product offerings have grown to include 35 categories comprising 40,000 SKUs sourced from more than 300 Indian and international brands. The platform continues to enhance digitalization by launching tools for buyers and sellers, building a fully digital B2B ecosystem. As of September 30, 2024, the company had incurred a total capex of INR84,700mn, representing ~85% of the total project cost.
* Cellulosic business: The Cellulosic Fibre business reported volumes of 219 KT in Q2FY25, reflecting a 4.3% YoY increase. Revenue for the segment stood at INR41,250mn, registering a 6.1% YoY growth and an 8.9% QoQ rise. Management observed improving global demand trends for cellulosic fibres, supported by inventory normalization and the segment's strong sustainability credentials. A stable demand environment led to a 6% YoY increase in China’s CSF prices during Q2FY25. Additionally, inventory levels in China decreased to 8 days this quarter compared to 12 days in Q2FY24. However, the CSY business continues to face challenges from low-cost imports from China, although domestic demand showed marginal improvement during the festival season in India.
* Chemicals business: The company reported revenues of INR 20,660mn for Q2FY25, reflecting a 3.3% YoY increase but a marginal 0.6% decline QoQ. Southeast Asia caustic prices, measured by CFR benchmarks, marked their fifth consecutive quarter of improvement, while domestic caustic prices also strengthened during the quarter. However, ECU realizations were adversely impacted by an oversupply of chlorine, leading to higher negative realizations. Caustic soda sales volumes declined by 4% YoY, primarily due to a maintenance shutdown at the captive power plant of the company’s largest integrated facility in Vilayat. The Chemicals business reported EBITDA growth of 16% YoY in Q2FY25, driven mainly by improved performance in chlorine derivatives and specialty chemicals.
Outlook and Valuation: Grasim Industries is poised for strong growth, driven by its leadership in cement (UltraTech), expanding chemicals portfolio, and strategic diversification into high-potential areas like paints and B2B e-commerce. The paints business launch in FY25E, supported by INR10bn+ investment, and UltraTech capacity expansion will enhance market position. Grasim expects to see increased premiumization in this market. Additionally, the positive reception of private label tiles in the B2B sector has prompted plans to broaden the product line with private label plywood and doors. As per our FY27E estimates we expect Revenue/ EBITDA/PAT to grow at a CAGR of 10.1%/9.1%/14.6% respectively over FY24-FY27E. We value the company on a SOTP basis to arrive at a TP of INR 2,777, maintaining our rating to HOLD.
For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131









