Grasim Industries - In line performance- VSF profitability close to bottoming out - Emkay

- Stnd EBITDA at Rs2.14bn (-1.2% yoy) in line. VSF EBITDA/kg at Rs22.7/kg, -7% yoy, above estimates of Rs21.7/kg led by lower pulp prices. APAT at Rs22.4bn higher led by other inc

- Conso Net sales at Rs75.5bn, + 4.8% yoy. However lower profitability in cement (Q4 Ultratech EBIDTA -5% yoy) conso EBITDA at Rs14.5bn declined 4.4% yoy. Conso APAT at Rs7.5bn, -6.5% yoy

- VSF realizations remain low despite higher cotton prices, led by surplus VSF capacity in China & high cotton inventory levels. Near term pricing pressure persists cut standalone EPS by 6.2%/5.5% for FY14E/15E, consol EPS by 6.2%/6.1%

- See VSF profitability bottoming out in FY14. Grasim a classic bottom out play- adjusted for value of Ultratech & Investments, Stock already close to June-12 lows. Valuation remains attractive with Holdco Disc at ~50%. BUY

Source : Equity Bulls

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