Buy Grasim Industries, target of Rs 2536: Motilal Oswal

Motilal Oswal has maintained its buy rating on Grasim Industries with a target price of Rs 2,536 in its May 19, 2009 research report.

“Grasim’s 4QFY09 results were above estimates, with EBITDA margin of 23.6% and PAT of Rs 3.85 billion. Performance was driven by significant QoQ improvement in cement and VSF, but was restricted by losses in sponge iron business. Net sales up 5.9% to Rs 28.9 billion, EBITDA up 5% to Rs 6.8 billion, but PAT down 7% to Rs 3.8 billion: EBITDA margin increased 480bp QoQ (flat YoY) to 23.6%, driven by margin expansion in both VSF and cement business. However, higher depreciation, interest cost and higher tax provisioning restricted recurring PAT to Rs 3.85 billion (7% YoY decline).”

“The outlook for Grasim’s core business has improved, with pick-up in volumes in VSF and cost savings in cement. Further, Grasim is nearing the end of its capex cycle and would start generating free cash flows and turn net cash. Grasim is financially well placed to fund its growth plans and drive consolidation in the industry. It is best placed among its peers, as there is high growth visibility and cost savings triggers exist. The stock is valued at 10.6x FY10E consolidated EPS, and an EV of 5.9x EBITDA and USD 100/ton (on fully expanded capacity). We maintain Buy with an SOTP-based target price of Rs 2,536,” says Motilal Oswal’s research report.

source: Moneycontrol

Tags: grasim industries, indian stock market, nse bse, share market, stock market, stocks

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