MOSL: GRASIM INDUSTRIES (Neutral)-Input cost pressures dent margins-multiple expansions in process
Grasim Industries: Input cost pressures dent margins; multiple expansions in process
(GRASIM IN, Mkt Cap USD8.6b, CMP INR908, TP INR960, 6% Upside, Neutral)
- Profitability impacted by higher costs: Standalone revenue increased 16% YoY to INR53.5b (in-line) in 4QFY19, driven by VSF (+18% YoY) and Chemical (+17% YoY) segments. EBITDA grew 6% YoY to INR8.9b (our estimate: INR10.7b), with the margin contracting 1.5pp YoY to 16.8% due to higher cost.. PBT after exceptional items stood at INR6.7b (+36% YoY). The company reported PAT of INR5.4b (-9% YoY; our estimate: INR6.5b).
- VSF segment: Volumes increased 13% YoY led by debottlenecking of capacities, with revenue at INR26.2b (+18% YoY). Consequently, EBITDA rose 3% YoY to INR4.1b. Margins shrank 2.2pp YoY to 15.7% due to cost pressure.
- Chemical segment: Volumes rose 21% YoY for the quarter, with revenue at INR16.8b (+17% YoY). EBITDA stood at INR4.3b (+5% YoY), supported by higher ECU realization and sales volume. Margin shrank 2.9pp YoY to 25.7%.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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