Motilal Oswal has given Buy recommendation for Grasim recommended buy rating on the stock with a target price of Rs 1880 in its research r with a target price of Rs. 1880 in its research report issued on Aug 13, 2022
Motilal Oswal’s research report on Grasim
OPM at 18% (v/s estimated 17%). Chemical segment’s OPM stood at 29.5% (up 9pp QoQ) v/s estimated 24%. VSF segment’s OPM was at 11.6% (up 5pp QoQ) v/s estimated 13.8%. Profit stood at INR8.1b (v/s estimated INR6.7b) in 1QFY23. Recent decline in VSF prices in China coupled with reduced orders by the US and European retailers in anticipation of a demand slowdown can hurt the company’s near-term margins. Caustic soda prices too have declined in the global markets and hence, chemical segment margins may see some pressure going forward. We raise our FY23E EPS by 8% factoring in the strong 1QFY23 performance; however, we largely maintain our FY24 estimate. We expect the company to benefit from its capex plans and remain positive on its foray into the Paints business (launch expected in 4QFY24). Maintain BUY.
We value the standalone business at 6.5x FY24E EV/EBITDA and other listed subsidiaries at a 35% holding company discount to arrive at our TP of INR1,880 (v/s INR1,715 earlier). Increase in our TP for Grasim is primarily driven by an upgrade in UTCEM’s TP recently. We maintain our BUY rating on the stock.