16 Aug 2018
Brokerages bullish on Grasim after Q1 profit jumps 12%, expect stock to return upto 40%
Morgan Stanley is overweight on Grasim with a target price at Rs. 1,329 per share as outlook for the VSF business remains constructive.
Grasim Industries share price gained a percent intraday on Thursday after the Aditya Birla Group firm reported 12 percent year-on-year consolidated profit growth to Rs 1,399.51 crore for the first quarter ended June 2018.
Brokerage houses remained positive on the stock after Q1 earnings and expect the stock to return up to 40 percent over a period of one year. At 9:22 hours IST, the stock price was quoting at Rs 994.95, up 0.69 percent on the BSE.
Grasim said its total income during the quarter under review increased 52 percent year-on-year to Rs 17,089.65 crore compared to Rs 11,222.17 crore in the year-ago period. The company said its "current quarter results are not comparable with that of the corresponding quarter of the previous year".
The previous year's results do not include the results of the erstwhile Aditya Birla Nuvo Ltd which was merged with the company with effect from July 1, 2017, the company said. Grasim's revenue from viscose - pulp, viscose staple fibre (VSF) and filament yam segment grew by 24 percent YoY to Rs 2,480.41 crore and cement business grew by 14 percent to Rs 9,021.41 crore in Q1FY19.
"The VSF business reported its highest ever quarterly production and sales volume of 134KT and 132KT respectively. The share of the domestic sales in the overall sales rose to 82 percent in Q1FY19 vis-à-vis 69 percent in Q1FY18," the company said in a statement. Over the outlook, the company said that its VSF business will continue to focus on expanding the market in India by partnering with the textile value chain. In cement, the demand is expected to be healthy and with the additional capacities acquired through the organic and inorganic route and its rapid ramp-up, UltraTech is very well placed to participate in the growth of the economy.
Here are views from brokerage houses that remained positive on the stock:
Brokerage: JPMorgan | Rating: Overweight | Target: Rs 1,350 | Return: 37%
While having Overweight call on the stock with a target price at Rs 1,350 per share, the global brokerage house said the company is well placed to deliver strong earnings growth over 2-3 years. It's an indirect play on an expected cement upcycle and its VSF & chemical business have been seeing strong trends. Stock seems to be pricing in a 55 percent discount to subsidiaries while the downside risks include a sharp decline in VSF prices, it said.
Brokerage: Morgan Stanley | Rating: Overweight | Target: Rs 1,329 | Return: 35%
Morgan Stanley is also Overweight on the stock with a target price at Rs 1,329 per share as outlook for the VSF business remains constructive. Capacity growth in VSF & chemicals should further support earnings. While capex will rise, the standalone balance sheet remains healthy.
Brokerage: Deutsche Bank | Rating: Buy | Target: Rs 1,380 | Return: 40%
The global brokerage house has reiterated its Buy call on Grasim with a target price at Rs 1,380 per share as volume growth will be robust in both VSF & chemicals businesses. Near-term margin outlook remains strong.
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