Grasim Industries - March 2013 Results Preview - Motilal Oswal

- VSF business volumes are estimated to be flat YoY (+21% QoQ) at 95,071 tons, impacted by uncertain global economic outlook. VSF realizations are estimated to decline by ~INR1/kg QoQ, YoY to INR121/kg, influenced by weak Chinese VSF pricing and soft cotton prices. We assume price/kg of INR124/124/126 for FY13E/14E/15E.

- Standalone EBITDA margin is estimated to improve by ~5pp YoY (+2.7pp QoQ) to 20.6% YoY.

- EBITDA is estimated to grow by 18% YoY (+18.6% QoQ) to INR2.6b, translating into PAT of INR2.9b - a growth of 20% YoY (48% QoQ). Reported PAT will increase by 86% YoY to INR4.5b led by INR2 profit from the sale of Alexandria Carbon Black Co and Thai Carbon Black.

- We downgrade FY13E/14E/15E consolidated EPS by 2.7%/7%/2.5% to INR312/INR339/INR429 respectively due to uncertain VSF outlook in the short term and downgrades in UltraTech.

- The stock trades at 6.6x FY15E consolidated EPS, 3.2x FY15E EV/EBITDA and USD61/ton. Maintain Buy with a target price of INR3,755 (FY15E SOTP-based).

Source : Equity Bulls

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