Motilal Oswal's research report onGrasim Industries
We expect VSF profitability to remain resilient, supported by relatively tight supply conditions and lower inventory levels in China, which should help sustain higher VSF realizations. Stable pulp prices and lower caustic soda ash prices are estimated to support margin expansion in the VSF business. In the chemical segment, lower caustic soda ash prices (down ~17% QoQ in 2QFY27’QTD) would hurt realizations. However, backward integration, increasing captive consumption of intermediates, and healthy growth in downstream products should support margins. In Paints, the company remains focused on market share gain. We expect strong pricing-led revenue growth in 2QFY27, although the full impact of elevated input costs and higher advertising and brand-promotion spends ahead of the seasonally stronger period is likely to result in wider losses during the quarter.
We estimate the company’s standalone revenue/EBITDA/PAT CAGR at ~15%/35%/107% over FY26-28. We expect the company’s standalone netdebt to peak out in FY27 and start reducing from FY28. The net debt-toEBITDA ratio is estimated at 2.0x in FY28 vs. 4.1x in FY26. We reiterate our BUY rating on GRASIM with our SoTP-based TP of INR3,800.
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