Buy Grasim Industries, target Rs 988: Edelweiss Securities
Buy Grasim Industries at a price target of Rs 988.
Edelweiss Securities has a buy call on Grasim Industries with a target price of Rs 988.
The current market price of Grasim Industries is Rs 710.80.
Time period given by the brokerage is one year when Grasim Industries price can reach the defined target.
Investment rationale by the brokerage: Grasim Industries’ standalone Q3FY19 EBITDA impressed yet again rising 18 per cent YoY (being 11 per cent ahead of estimates). While VSF performance is in line, the chemicals and textile segments led the overall outperformance. Factoring in 9MFY19 and Grasim’s proven ability to withstand global headwinds, we see no major risks to our FY19 and FY20 estimates. Besides, we are introducing FY21E with EBITDA growth of 8 per cent. While the overhang of capital allocation to group companies – Vodafone Idea (Idea) and Aditya Birla Capital (ABCL) – remains, we retain ‘BUY/SP’ on Grasim given : (1) 60.3 per cent stake in UltraTech Cement exceeds its current market cap (therefore a value play), and (2) sanguine outlook for the SA entity over medium to long term. Factoring in the recent cuts in target prices of key holdings and rolling over the valuation to Q1FY21E, we are tweaking down our SOTP based target price to Rs 988 (from Rs 1,066).
The current market price of Grasim Industries is Rs 710.80.
Time period given by the brokerage is one year when Grasim Industries price can reach the defined target.
Investment rationale by the brokerage: Grasim Industries’ standalone Q3FY19 EBITDA impressed yet again rising 18 per cent YoY (being 11 per cent ahead of estimates). While VSF performance is in line, the chemicals and textile segments led the overall outperformance. Factoring in 9MFY19 and Grasim’s proven ability to withstand global headwinds, we see no major risks to our FY19 and FY20 estimates. Besides, we are introducing FY21E with EBITDA growth of 8 per cent. While the overhang of capital allocation to group companies – Vodafone Idea (Idea) and Aditya Birla Capital (ABCL) – remains, we retain ‘BUY/SP’ on Grasim given : (1) 60.3 per cent stake in UltraTech Cement exceeds its current market cap (therefore a value play), and (2) sanguine outlook for the SA entity over medium to long term. Factoring in the recent cuts in target prices of key holdings and rolling over the valuation to Q1FY21E, we are tweaking down our SOTP based target price to Rs 988 (from Rs 1,066).
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