Buy Grindwell Norton; target of Rs 805: ICICI Direct

ICICI Direct's research report on Grindwell Norton

Grindwell Norton (GNL) reported strong Q2FY21 numbers across operational parameters owing to owing to better demand and revival in key sectors like automotive, industrial, construction, engineering amid economic recovery. Revenues were at Rs 457.7 crore, decent growth of 11.6% YoY primarily aided by strong performance in ceramics & plastic segment. Revenue contribution from abrasives, ceramics & ‘new initiatives’ segment were at ~58%, ~34% & ~9%, respectively. Overall, EBITDA margins were at 21.4%, improving 460 bps YoY. This was primarily aided by reduction in overall operating expenses and better gross margins that improved 180 bps to 56.9%, YoY. PAT grew 40.3% to Rs 66.0 crore YoY despite lower other income, which declined 35% YoY to Rs 5.0 crore.

Outlook

We introduce FY23E estimates and value GNL at 34x FY23E EPS to arrive at a target price of Rs 805 (earlier Rs 600). We change our rating form HOLD to BUY.