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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.
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