Grasim Inds Ltd. Q4FY21 – Earning Analysis – Globe Capital
17-Nov-2021
Grasim Inds Ltd. Q4FY21 – Earning Analysis

At the CMP of Rs. 1371, the stock is trading at full year P/E multiple of 21.8 times with the full year EPS of Rs 62.88 per share.

Q4 FY21 Overview and Verdict
CMP
Rs. 1371
Verdict
Higher than estimates

At the CMP of Rs. 1371, the stock is trading at full year P/E multiple of 21.8 times with the full year EPS of Rs 62.88 per share.

The Company’s consolidated net profit for the March quarter rose 13.30% to Rs 2,616.64 crore from Rs 2,309.41 crore in the same quarter last year.

The total revenue from operations jumped to Rs 24,398.92 crore from Rs 19,349.54 crore in the corresponding quarter last year, registering a gain of 26%.

Ebitda for the quarter surged 62% YoY to Rs 5,142 crore.

The board of Directors of Grasim has recommended a dividend of Rs 5/- and a special dividend of Rs 4/- for the year ended March 2021, taking the total dividend to Rs 9/-.

Management Takeaways:

The management said for its viscose business, the buoyancy in the domestic demand was reflected in 9% YoY growth in the domestic sales, while its chemical business, especially the advanced material (epoxy) sales volume growth was driven by demand across segments, especially from the wind and auto segment.

The sector witnessed demand outstripping the supply due to raw material constraint, coupled with disruption at certain global manufacturers.

Paint Segment

The Company added that its paint business is making brisk progress in line with the plans. The company has recently forayed into the paints business with a capital of Rs 5,000 crore for three years. The company is in the process of hiring senior professionals and specialists for the business. It is also actively engaged in shortlisting/acquiring land for plant locations and is progressing with the engineering planning for the project.

The company’s chemical business makes domestic caustic soda business and advanced material business. The caustic soda capacity utilisation improved to 94% in Q4FY21 from 89% in Q3FY21. International caustic soda prices improved sequentially led by temporary supply disruptions in the later part of the quarter.

The total Capex spend for FY21 stood at Rs 1,508 Cr. The Capexplan for FY22 (excluding paints and fertiliser) is Rs 2,604 Cr. which includes the VSF expansion project at Vilayat with Line-1 scheduled to be commissioned in Q2FY22 and Line-2 in Q3FY22.

Its Capex plans also include investment towards increasing its Advanced Materials (Epoxy) business capacity by ~125 KTPA through a brownfield expansion at the existing location of Vilayat.

In the Chlor-Alkali business, Grasim plans investment in a ~200TPD Caustic brownfield expansion at Vilayat, Gujarat. This would take the total capacity to ~1,400 TPD at its Vilayat site and will primarily meet the customer requirements in the country’s West Region. The expansion will be commissioned in 24 months post receipt of statutory clearances/approvals.

Its fertiliser Business divestment process is expected to be completed by Q2FY22 after receipt of NCLT approvals for the Scheme of Arrangement amongst other pending approvals.

Revenue and EBITDA from the discontinued operations (Fertiliser Business) for Q4FY21 stood at Rs 560.96 crore and Rs 33.16 crore respectively which is not included in the financials.

Disclosure

Globe Capital Market Limited (“GCML”) is a Stock Broker registered with BSE, NSE and MSEI in all the major segments viz. Capital, F & O and CDS segments. GCML is also a Depository Participant and registered with both the Depositories viz. CDSL and NSDL. Further, GCML is a SEBI registered Portfolio Manager. GCML includes subsidiaries, group and associate companies, promoters, directors, employees and affiliates.

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