MOSL: GRASIM INDUSTRIES (Neutral)-Earnings loss attributed to exceptional item related to investment in Vodafone-Idea
Grasim Industries: Earnings loss attributed to exceptional item related to investment in Vodafone-Idea
(GRASIM IN, Mkt Cap USD7.4b, CMP INR808, TP INR895, 11% Upside, Neutral)
- Healthy standalone performance: Standalone revenue increased 27% YoY to INR51.2b (our estimate: INR42.5b) in 2QFY19, led by VSF (+23% YoY) and Chemical (+38% YoY) segments. EBITDA grew 36% YoY to INR10.7b (our estimate: INR9.5b), with the margin expanding 1.46pp YoY (-1.1pp QoQ) to 20.9%. PBT before extraordinary items stood at INR11.1b (+32% YoY; our estimate: INR8.4b). During the quarter, the company's holding in IDEA reduced from 23.13% to 11.55% post the merger of Vodafone India Limited and Vodafone Mobile Services Limited with Idea Cellular Limited effective from 31st August, 2018 –the merged entity has been named as Vodafone Idea Limited (VIL). As a result, the investment in VIL is based on fair value as on that date, and the difference in the book value and the fair value of the investment amounting to INR23b has been charged in the current quarter as an exceptional item. Subsequent change in the fair value of the investment in VIL has been accounted in other comprehensive income. Hence, the company reported a loss of INR11.8b. Adj. PAT, however, increased 30% YoY to INR8.2b (our estimate: INR5.8b).
- VSF segment: Volumes increased by 10% YoY and revenue by 23% YoY to INR26b, resulting in a 23% YoY increase in EBITDA to INR5.8b.
- Chemical segment: Volumes increased 18% YoY as utilization stood at 93% for the quarter. Chemical revenue stood at INR16b. EBITDA was at INR4.6b, supported by higher ECU realization and sales volume.
Grasim Industries Limited is a holding company. The Company's segments include Viscose Staple Fibre and Wood Pulp; Cement, which includes Grey, White and Allied Products; Chemicals, which includes Caustic Soda and Allied Chemicals, and Others, which includes textiles. Its products include viscose staple fibre, rayon grade pulp, grey cement, white cement and textiles. The Company conducts its cement business through its subsidiary, UltraTech Cement Limited. Viscose Staple Fibre is used in apparels, home textiles, dress material, knitted wear and non-woven applications, and its plants are located at Nagda in Madhya Pradesh, Kharach and Vilayat in Gujarat and Harihar in Karnataka, with an aggregate capacity of over 500 kilo-tons per annum. It also offers fabrics and synthetic yarns through its subsidiary, Grasim Bhiwani Textiles Limited. It caters to international fashion houses in the United States and the United Kingdom supplying fabric to them for manufacturing of garments.
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