Buy Grindwell Norton; target of Rs 2528 Prabhudas Lilladher

Prabhudas Lilladher's research report on Grindwell Norton

Grindwell Norton (GWN) reported a mixed quarter with revenue growing by 4.0% YoY and EBITDA margin declining by 107bps to 18.6%. During H1FY25, Abrasives segment revenue grew by 5.5% YoY to Rs7.0bn while EBIT margin dipped to 13.2% (vs 14.0% in H1FY24). 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 Rs5.9bn, up 6.8% YoY; however segment margin declined by 246bps to 17.2% (vs 19.7% in H1FY24). We expect margins to improve in this segment driven by better product mix and higher volume with recovery in export demand. Digital Services segment revenue came in at Rs911mn, down 5.9% YoY with margin declining by 867bps to 28.5%.

Outlook

We revise our FY25/26E EPS estimates by -7.9%/-8.0% factoring in lower revenue growth, but upgrade the rating to ‘Buy’ from Accumulate given the recent sharp correction in stock price, with a revised TP of Rs2,528 (Rs 2,749 earlier) .