Accumulate Grasim Industries; target of Rs 2720: FIFL

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Accumulate Grasim Industries; target of Rs 2720: FIFL

Fortune Interfinance (FIFL) is bullish on Grasim Industries and has recommended accumulate rating on the stock with a target of Rs 2720 in its January 30, 2012 research report.

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Fortune Interfinance (FIFL) is bullish on Grasim Industries and has recommended accumulate rating on the stock with a target of Rs 2720 in its January 30, 2012 research report.

"Grasim's Q3FY12 EBITDA at Rs2.8bn (-23% yoy) came in below estimates (Rs3.53bn) on account of lower than estimated VSF volumes and higher costs. Though VSF realizations improved 4.4% yoy to Rs128/kg (due to rupee depreciation), volumes disappointed with a 7.6% decline (as global slowdown and Euro zone uncertainties affected demand for VSF) thereby dragging VSF sales by 3.9% yoy to Rs10.85bn (vs est of Rs11.53bn). Consequently net sales for the quarter at Rs12.38bn (+2% yoy) came in below estimates of Rs13.12bn. On the cost front higher landed cost of imported pulp due to rupee depreciation and super inflated energy costs have resulted in margin contraction of 8820bps to 25.6% for the VSF segment."

"Grey cement volumes increased 4.1% YoY (7.8% QoQ) to 10.8 mn tonnes due to Star Cement acquisition and strong demand in northern and western region in India. The realisations for the grey cement increased 18% YoY and QoQ by 8.4% to 3,944/tonne. The blended EBITDA per tonne for the quarter stood at INR 931 as compared to INR712 in Q3FY11 and INR614 in Q2FY12.
 Grasim reported Q3FY12 numbers were in line with our expectations. The company reported net profit of INR 6.1 bn as compared to our estimates of IN6bn. Consolidated revenues for the quarter grew by 16.3% YoY(10.8% QoQ) to INR 63 bn mainly on the back of YoY increase in volumes and realisations in cement business. EBITDA margins improved by 10 bps YoY (490 bps QoQ) due to improvement in margins in cement business. On the back of higher revenues and margins EBITDA grew by 16.9% YoY (45% QoQ) to INR13 bn."

"We at FIFL believe that at the CMP of ` 2,580 the stock is trading at 10.48 x FY13E EPS .We maintain " Accumulate" on the stock with a target price of ` 2,720 based on 11.05 x FY13E EPS," says Fortune Interfinance research report.

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To read the full report click on the attachment