Grasim - Q1FY14 Results - Nirmal Bang Institutional

- Grasim Industries' (GIL) 1QFY14 consolidated EBITDA declined 20.3% at Rs12.7bn (7%/2% below our estimate/Bloomberg consensus estimate, respectively) due to lower sales volume in the cement business and weak realisation in VSF (viscose staple fibre) business.

- Net profit at Rs6.1bn was above our and Bloomberg consensus estimates by 3.5%/9%, respectively, led by higher other income and lower tax provisioning. Net sales at Rs68.9bn were broadly in line with our/Bloomberg consensus estimates.

- We have cut our EBITDA estimates by ~10% each to factor in lower realisation and profitability of the VSF and cement segments and reduced earnings estimates by just 4%/7% for FY14/FY15, respectively, following tax provision at a lower rate.

- Although we expect VSF prices to remain under pressure in the near term, we are positive on the stock on the back of likely recovery in cement demand in 2HFY14, peak holding discount of 49% for the cement business and attractive valuation.

- Following the cut in our earnings estimates, we have revised GIL's target price downwards at Rs3,270 (from Rs3,450 earlier), but retained our Buy rating on it.

Source : Equity Bulls

Keywords