Grasim Industries - Core Businesses Seeing Recovery; Paints On Track: Motilal Oswal

Motilal Oswal Report

Grasim Industries Ltd. should benefit from the price increases in the viscose staple fibre and chemical segments. The average VSF price in China was up ~4% QoQ in Q2 FY25, while the spot price is now further up ~3% versus Q2 FY25 average. Though the caustic soda average price in Q2 FY25 was flat QoQ, the spot price is now up ~2% versus the Q2 FY25 average. 

The company’s VSF capacity utilization reached ~96% in FY24. Currently, it is exploring debottlenecking opportunities to drive volume growth in the VSF segment.

Further, the company is expanding its caustic soda capacity by ~13% to 1.5mtpa by FY26 to maximize the scale advantages and gain market share.

We estimate the company’s core businesses (largely VSF and Chemical) to clock a ~14% Ebitda CAGR over FY24-27E vs. a decline of ~6% p.a. over FY22-24.

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