Grasim Q1 PAT may fall 43% at Rs 155 cr: Motilal Oswal

Motilal Oswal has come out with its first quarter (April-June) earnings estimates for the cement sector. The brokerage house expects Grasim to report a 27.2 percent degrowth quarter-on-quarter (down 43.2 percent year-on-year) in net profit at Rs 154.9 crore.

Revenues are expected to decrease by 15.8 percent Q-o-Q (down 6.4 percent Y-o-Y) to Rs 1,159.6 crore, according to Motilal Oswal.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to fall by 11.4 percent Q-o-Q (down 35.7 percent Y-o-Y) to Rs 189.8 crore.

Motilal Oswal report on Grasim

We expect VSF volumes to grow 2.6 percent Y-o-Y (decline 17 percent Q-o-Q) to 79,052 tonne, impacted by the uncertain global economic outlook. VSF realizations would decline by INR 10/kg Y-o-Y (INR 1/kg Q-o-Q) to INR 118/kg, influenced by weak Chinese VSF pricing and soft cotton prices. We are assuming price/kg of INR 121/124 for FY14/15.

Standalone EBITDA margin is likely to contract 7.4pp Y-o-Y (expand 80bp Q-o-Q) to 16.4percent.

We expect EBITDA to decline 36 percent Y-o-Y (11 percent Q-o-Q) to INR 1.9 billion and PAT to decline 43 percent Y-o-Y (27 percent Q-o-Q) to INR 1.5 billion.

The stock trades at 7.2x FY15E consolidated EPS, and an EV of 4.6x FY15E EBITDA and USD78/ton.