Grasim Q4 Results Review: Core Business Weak; Paints’ Revenue Promising; Motilal Oswal Maintains 'Buy'

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Motilal Oswal Report

Grasim Industries Ltd.'s core businesses, namely viscose stape fibre and chemicals, are experiencing margin pressure due to global challenges, as demand remains subdued and new capacities for caustic soda are being introduced. However, the Paint and B2B ecommerce businesses delivered a better-than-estimated revenue run rate.

Going forward, growth in revenues of these two segments and reduction in losses will be the key monitorables.

Management has reaffirmed its guidance of $1 billion revenue for the B2B e-commerce business by FY27 and Rs 100 billion revenue for the paints business by FY28.

We reiterate our Buy rating with a target price of Rs 3,170 as we value its:

1. holding in listed subsidiaries by assigning a discount of 35% on our target price for coverage companies,

2. standalone business at six times FY27E EV/Ebitda,

3. paint business at two times of investments, and

4. renewable business at 10x FY27E EV/Ebitda.

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