Grasim Q1 Review - Strong Recovery In Viscose Staple Fibre; Chemical OPM Up Sequentially: Motilal Oswal

Motilal Oswal Report

Grasim Industries Ltd. reported an Ebitda of Rs 6.7 billion (versus estimate Rs 5.2 billion) and operating profit margin of 10.8% (versus estimate 8.2%) in Q1 FY24.

The beat was driven by viscose staple fibre segment that posted an Ebitda/kg of Rs 19.9 (versus estimate Rs 13.8/kg) and chemical segment that clocked an OPM of 16.7% (versus estimate 13.5%). Profit was at Rs 3.6 billion (versus estimate Rs 1.6 billion).

Management believes that margins in both the key business segments, VSF and chemical, have almost bottomed out. Lower input costs aided profitability improvement for the VSF segment and higher sales of value added products.

Further, increased chlorine integration supported sequential margin improvement in the chemical segment. Commissioning of Lubrizol plant as well as increase in VAP capacities will help improve chlorine integration to 72% from 61% in June 2023 (60% in FY23).

We largely maintain our Ebitda estimates for FY24/FY25. Margin in the VSF segment witnessed a strong recovery and we expect Ebitda/kg to be at Rs 13/Rs 18 in FY24/25.

Reiterate 'Buy' with a target price of Rs 2,100.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.