MOSL: GRASIM INDUSTRIES (Neutral)-Margins decline for VSF, but improve for chemical segment
Grasim Industries: Margins decline for VSF, but improve for chemical segment
(grasim IN, Mkt Cap USD6.9b, CMP INR753, TP INR836, 11% Upside, Neutral)
- Profitability impacted by VSF: Standalone revenues increased 21% YoY to INR52.9b (v/s our estimate of INR49b), led by VSF (+20% YoY) and Chemical (+19% YoY) segments. EBITDA grew 18% YoY to INR10.5b (v/s our estimate of INR9.9b), with margin contracting 0.4pp YoY (-1pp QoQ) to 19.9%. PBT stood at INR 8.8b (+21% YoY; v/s our est. of INR10.4b). The company reported PAT of INR6.08b, (+31% YoY; v/s our est. of INR7.4b).
- VSF segment: Volumes increased 5% YoY, with revenue at INR26.2b (+20% YoY), resulting in a 3% YoY increase in EBITDA to INR4.8b. Margins for VSF declined 3pp YoY to 18.2% due to cost pressure.
- Chemical segment: Volumes increased 11% YoY for the quarter. Chemical revenue stood at INR15.6b (+19%YoY). EBITDA stood at INR4.4b (+23%YoY) with margins increasing 1pp YoY to 28.3% supported by higher ECU realization and sales volume.
- Key concall highlights: (1) Management clarified it will continue to maintain its 11.5% stake in Vodafone-Idea Limited (VIL). (2) 3QFY19 witnessed prices of key input materials rising with pulp increasing 12% YoY; sulphur by 28% YoY and coal by 9% YoY.
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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