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Grasim Industries (VSF gaining strength, ADD):
We met Grasim Industries’s management for an update on the recent developments in VSF and cement. Here are the key takeaways from our meeting:
- Strong demand for VSF has led to Rs5 per kg (4.2%) price increase recently. Raw-material costs for VSF are stable.
- Cement demand turned sluggish in November after a strong October; Grasim expects FY11 growth in despatches at 9%.
- We expect VSF prices to increase further, as international prices of cotton and VSF have rallied in the past two months.
- We expect sluggish cement demand growth for the industry and intense competition from new players to depress despatch growth for UltraTech Cement (Grasim’s cement subsidiary) vis-à-vis the industry.
- We have largely retained our earnings estimates for FY11 and FY12. We retain ADD with a target price of Rs2,383.
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