Grasim Industries - Q3FY13 Preview - HDFC Securities

Grasim's overall results could be influenced by its VSF segment performance. VSF volumes are expected to move up with realisation on the downward slope. Standalone revenue could rise driven by y-o-y increase in sales volume of VSF. However, VSF realisations are expected to drop. This could result in lower standalone EBIDTA. Consolidated EBITDA is also expected to decline 8-9% y-o-y due to decline in cement segment and VSF segment's profitability.

PAT is also expected to dip y-o-y due to higher tax rate and depreciation. Phase I of the expansion (18,250 tons) in Harihar, Karnataka, was commissioned in Sep'12 while phase II of similar capacity is expected by Mar'13. The greenfield project in Vilayat, Gujarat, (120,000 tons) will be commissioned by May'13. These new capacities could support strong volume growth starting H2FY14E besides better realisations as major production in Vilayat would be of high-margin specialty fibre. The outlook for VSF demand and prices is not so rosy in the near term.

However, it is much brighter in the long term, given rising consumption in emerging markets and less pressure from supply of cotton.

Source : Equity Bulls

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