Motilal Oswal has given Buy recommendation for Grasim recommended buy rating on the stock with a target price of Rs 2050 in its research re with a target price of Rs. 2050 in its research report issued on Jan 06, 2022

Motilal Oswal’s research report on Grasim

Grasim Industries (Grasim) should benefit from the changes in cotton industry dynamics. VSF demand growth should outpace cotton until FY25E. Further, the US ban on cotton imports from Xinjaing region may trigger a shift to substitute products. Focus on backward integration in the Chemical segment should improve chlorine usage as Grasim plans to increase chlorine consumption in value added products (VAPs) to 40% by FY25E from 28% in FY21. Chemical segment’s OPM should improve to 19% in FY23E from 13% in FY21. Further, likely capacity expansions of 37%/33% in the VSF/Caustic soda segments, respectively, should improve volume/profits during FY22-24E. We estimate a 16%/15% volume CAGR for the VSF/Chemical business, respectively, over FY21-24. Grasim’s plan to augment the capex of its Paints business indicates its intent of entering the paints segment on a large scale. Brand recall of Grasim as well as its strong balance sheet, and distribution network of UTECM’s white paints segment should help the company succeed in this segment. We upgrade our rating on Grasim to BUY from Neutral. We assign a: a) 6x Dec-23 EV/EBITDA to the standalone segment, b) 40% HoldCo discount for its holding in subsidiary companies, and c) 5% premium to our SoTP-based TP for the paints business, to arrive at our revised target price of INR2,050. Grasim is a quasi-play on the cement segment with UTCEM being our top pick in the large-cap space.

Outlook

Our target price for Grasim includes a 5% premium to the underlying SoTP valuation in order to capture the potential upside from its paints business. We upgrade our rating on Grasim to BUY from Neutral.

More Info on Trent

At 13:26 hrs Grasim Industries was quoting at Rs 1,796.30, up Rs 76.35, or 4.44 percent.

It has touched an intraday high of Rs 1,801.00 and an intraday low of Rs 1,723.00.

It was trading with volumes of 39,268 shares, compared to its thirty day average of 47,884 shares, a decrease of -17.99 percent.

In the previous trading session, the share closed down 1.68 percent or Rs 29.30 at Rs 1,719.95.

The share touched its 52-week high Rs 1,893.15 and 52-week low Rs 947.00 on 11 November, 2021 and 06 January, 2021, respectively.

Currently, it is trading 5.12 percent below its 52-week high and 89.68 percent above its 52-week low.

Market capitalisation stands at Rs 118,248.01 crore.

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