Grasim Industries - Rating: Hold; Target price: Rs2,875 - Centrum

Consolidated revenue is expected to increase 2.5% YoY to Rs69bn. EBITDA is expected to decline 13.3% YoY to Rs10.9bn led by lower profit of cement subsidiary (UltraTech) and decline in profit of VSF business.

Consolidated EBITDA margin is expected to be 15.8% against 18.7% in Q3FY13 and 14.5% in Q2FY14.

Adjusted PAT is expected to decline 6.7% YoY to Rs5.1bn in the quarter. Depreciation is expected to increase 13.5% YoY to Rs3.6bn due to the commissioning of new capacities in cement and VSF businesses. Adjusted PAT margin is expected to be 7.4% vs. 8.2% in Q3FY13 and 3.9% in Q2FY14.

We expect the company to report standalone revenue of Rs14.3bn, up 6.8% YoY driven by 20.9% YoY decline in sales volume of VSF to 95,000tonnes. Standalone EBITDA is expected to be at Rs2.7bn (down 6.6% YoY) and profit is expected to be at Rs2.9bn (down 23% YoY).

Earnings and target price revised downwards: We are revised revenue estimates downwards by 2.9%/1.8%/1.8% for FY14E/FY15E/FY16E on the back of downward revision in sales volume and realization estimates for its cement subsidiary (UltraTech). EBITDA estimate for the company is getting revised downwards by 9.8%/7.5%/7.2% for FY14E/FY15E/FY16E. We maintain Hold rating on the stock with a revised price target of Rs2,875 (earlier: Rs3,088), an upside of 5.9% from the CMP.

Source : Equity Bulls

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