Hold Grindwell Norton; target of Rs 550: ICICI Direct

ICICI Direct recommended hold rating on Grindwell Norton with a target price of Rs 550 in its research report dated May 25, 2020.

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May 26, 2020 / 13:49 IST

26 Aug, 2025 12:21

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ICICI Direct's research report on Grindwell Norton

Grindwell Norton (GNL) reported muted Q4FY20 numbers across operational parameters owing to overall automotive, industrial slowdown amid Covid-19. Revenues came in at Rs 365.9 crore, down 9.7% YoY. Abrasives, ceramics, new initiatives segment contributed ~60%, ~31%, ~9%, respectively. EBITDA margins were at 16.5%, down marginally by 20 bps YoY. This was primarily due to a decline in gross margins by ~20 bps YoY to 55.3% for the quarter. However, the margin decline was partly offset by lower power & fuel and other expenses, which were down 10.8%, 23% YoY, respectively. PAT de-grew 1.4% to Rs 41.8 crore, YoY, primarily aided by lower taxes. It has also recommended a dividend of Rs 7.5 per share.

Outlook

Going forward, we expect stable growth in plastics segment due to niche value added products in life sciences. However, industrial/automotive slowdown will continue to affect abrasive, ceramics segments. On the whole, abrasives, ceramics, new initiatives are expected to grow at CAGR of -0.6%, 2.6%, 2.0%, respectively, in FY20-22E. With cash balance of Rs 429 crore, debt-free status, we believe GNL is well placed to gain from any revival with strong market share in key segments. We value GNL at 33x FY22E EPS to arrive at a TP of Rs 550 & change our rating from BUY to HOLD.