Hold Grindwell Norton Ltd For Target Rs. 1,739 - Prabhudas Liladhar Capital Ltd
Persistent headwinds temper near-term outlook
We attended the annual investor call of Grindwell Norton (GWN) in which the management highlighted the financial performance of the company for FY25 and their strategic focus on the domestic market amid export uncertainties. Significant front-end investments in Abrasives capacity position the company to cater to a broader customer base, while the Ceramics & Plastics segment continues to benefit from healthy domestic demand across precision grinding, glass grinding, defence, and industrial applications. Management’s focus on application engineering, technical servicing, & innovation will position GWN favorably among competitors. However, persistent Chinese dumping in Abrasives and subdued export demand in the C&P segment remain key nearterm headwinds.
Chinese alternative products dumping, global tariff wars and change in mix of consumable demand will be key monitorable, however we remain positive on GWN due to its 1) focus on technologically advanced niche/high performance products in performance plastics, 2) penetration in newer high growth markets, 3) attention on tapping new verticals in Ceramics & Refractories, and 4) capacity expansion in coated abrasives, engineered ceramics and performance plastics. We revise our FY26/27E eps estimates by -4.7%/-6.4% given the continued threat from Chinese competition and subdued export outlook. The stock is trading at P/E of 47.3x/40.8x on FY26/27E earnings. We roll forward to Mar’27E and downgrade the rating from ‘Accumulate’ to ‘Hold’ with a revised TP of Rs1,739 (Rs1,716 earlier) valuing the stock at a PE of 40x Mar’27E (40x Sep’26E earlier). Downgrade to ‘Hold’.
Growth in Abrasives and fending off Chinese competition: Strategic capex in coated and non-woven lines has created ample capacity to meet domestic demand. The company is effectively countering Chinese competition— particularly in coated, non-woven, and thin wheel products—through innovation and enhanced customer engagement, while bonded abrasives remain competitive against European peers. Additionally, GWN’s growing presence in super abrasives positions it well to tap into high-growth sectors like semiconductors and electronics, supported by its strong focus on application engineering and technical services.
Strong domestic demand to drive the C&P segment growth: The segment is unlikely to reclaim the ~20%+ EBIT margins seen in FY23—driven by post-Covid export tailwinds—growth remains supported by domestic demand and capacity expansions at the Halol plant. PRS Permacel faced temporary setbacks due to design-related issues in the EV segment but is poised for recovery with new product introductions in thermal management and insulation. Additionally, GWN is positioned to benefit from emerging opportunities in defence armor ceramics, where approvals are progressing and geopolitical tailwinds strengthen the longterm outlook.
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