Accumulate Grindwell Norton; target of Rs 2749: Prabhudas Lilladher

Prabhudas Lilladher's research report on Grindwell Norton

We attended the annual investor call of Grindwell Norton (GWN) in which management highlighted its strategy to capture opportunities in domestic & international markets across its business segments. The company has plenty of opportunities to double its revenue in the next 4-5 years. It has made significant investments (~Rs6bn) in the past 3 years towards capacity expansion, acquisitions, R&D, and product innovation in order to be future ready. Once the investments begin to yield results, GWN should see healthy growth & margin improvement. The company is also leveraging its relationship with Saint-Gobain (SG) for transfer of capabilities, navigating new market segments, and support in product localization. Abrasives growth is expected to be driven by solar glass edge grinding, demand for high productivity solutions in construction & steel sectors, non-woven products in new market segments across the Middle East, ASEAN, Africa, and Europe, and backward integration in Sealants. Ceramics business has significant opportunities in armor, and the steel sector (blast furnaces, torpedo ladles, taphole clay). Performance Plastics is set to benefit from growing opportunities in Auto led by the transition to EVs, synergies in Tapes business from PRS Permacel, & strong domestic market position of SG Glass, and domestic demand for Life Sciences products.

Outlook

The stock is trading at a P/E of 63.1x/51.5x on FY25/26E earnings. We roll forward to FY26E and maintain ‘Accumulate’ rating with a revised TP of Rs2,749 (Rs2,512 earlier), valuing the stock at a P/E of 55x FY26E (51x Dec-25E earlier) given the large investments made by the company to capitalize on a multitude of opportunities.