Buy Grasim Industries; target Rs 2946: Firstcall Research

Firstcall Research is bullish on Grasim Industries and has recommended buy rating on the stock with a target price of Rs 2946 in its April 25, 2012 research report.

"Grasim Industries Limited, a flagship company of the Aditya Birla Group, ranks among India's largest private sector companies, with consolidated net revenue of Rs.202 billion. The Company core businesses are VSF and cement, which contribute to over 90 per cent of its revenues and operating profits. Grasim has grown to become a leading cement player in India. The Company has a global market share of 10 per cent. It is also the second largest producer of caustic soda (which is used in the production of VSF) in India. Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 8% over 2010 to 2013E respectively. The Company has acquired 1/3rd stake in Aditya Holding AB, Sweden, which acquired Domsjo Fabriker AB (Domsjo), Sweden, at an enterprise value of Swedish Kroner (SEK) 2.12 Billion (approx. Rs. 1,570 crore)."

"The company disclosed results for the quarter ended Dec 2011. Net sales for the quarter moved up 17% to Rs.63640.70 million as compared to Rs 54612.10 million during the corresponding quarter last year. During the quarter, the company has reported Net Profit increased to Rs.6690.70 million from Rs.5017.60 million in previous year same quarter. The Basic EPS of the company stood at Rs.72.95 for the quarter ended Dec 2011."

"At the current market price of Rs.2540.00, the stock is trading at 8.20 x FY12E and 6.88 x FY13E respectively. Price to Book Value of the stock is expected to be at 1.28 x and 1.03 x respectively for FY12E and FY13E. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.309.60 and Rs.369.35 respectively. The Company has a global market share of 10 per cent. It is also the second largest producer of caustic soda (which is used in the production of VSF) in India. Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 8% over 2010 to 2013E respectively. During the quarter, the company has reported Net Profit increased to Rs.6690.70 million from Rs.5017.60 million in previous year same quarter. On the basis of EV/EBITDA, the stock trades at 3.61 x for FY12E and 3.13 x for FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 2946 for Medium to Long term investment," says Firstcall Research report.

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