Accumulate Grindwell Norton; target of Rs 2749: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Grindwell Norton (GWN) reported a mixed quarter with revenue growing by 5.6% YoY and EBITDA margin declining by 136bps to 18.9%. During Q1FY25, Abrasives segment revenue grew by 7.3% YoY to Rs3.5bn while EBIT margin remained stable at 13.6%. Opportunities in solar glass edge grinding, demand for high productivity solutions in sectors like steel and construction along with expansion of non-woven products in new market segments are expected to drive Abrasives growth. Ceramics & Plastics revenue came in at Rs3.1bn, an 8.6% YoY growth however segment margin declined by 154bps to 17.9% (vs 19.5% in Q1FY24). We continue to expect margin improvement in C&P segment driven by better product mix and higher volume with recovery in export demand expected by Q4FY25. Digital Services segment revenue came in at Rs456mn (vs Rs505mn in Q1FY24), a decline of 9.8% YoY with margin declining by 848bps YoY to 29.9%. We believe GWN will likely see long-term profitable growth on the back of its 1) focus on technologically advanced niche/high performance products in performance plastics, 2) penetration in newer high growth markets, 3) attention on tapping new verticals in Ceramics & Refractories, 4) capacity expansion in coated abrasives, engineered ceramics and performance plastics, and 5) strong balance sheet, operating cash flows and return ratios (23.4% ROCE). The stock is trading at a P/E of 65.0x/53.0x on FY25/26E earnings.

We maintain ‘Accumulate’ rating with a TP of Rs2,749 (same as earlier) valuing it at a P/E of 55x FY26E.

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