Grasim Industries - VSF - The Gamechanger - Emkay

Grasim's VSF business to drastically alter Grasim's growth profile. Expect standalone EBIDTA CAGR of 16.3% over FY12-15E led by VSF volume growth of 12.2% CAGR.

- Higher capacity(164k tons VSF capacity nearing completion) + Global cost leadership (captive 85% pulp & 100% caustic soda) to drive VSF volumes & help re-gain market share.

- VSF price outlook to improve over expected bottoming out of cotton prices led by sharp decline in global cotton production

- Higher contribution of standalone earnings to drive down current holdco discount of 49%+ to more reasonable levels. Building in a 25% holdco discount and valuing Viscose business at 6X FY14E EBIDTA, BUY with a TP of Rs.3,700.

Source : Equity Bulls

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