Grasim Industries :VSF volume growth drives EBITDA above estimates: Emkay

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Grasim Industries

VSF volume growth drives EBITDA above estimates

ACCUMULATE

CMP: Rs 2,362                                       Target Price: Rs 2,700

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n     Grasim’s Q2FY12 EBIDTA at Rs2.9 bn (+10% yoy) above estimates led by higher VSF volumes. PAT at Rs3.44 bn (+23%yoy) ahead of est, led by high other income

n     17% jump in VSF volumes help rev. growth of 29%. Post high volatility seen in VSF prices in Q1FY12, prices have started recovering in Sept-11.  Management shares uncertain price trend for VSF due to economic conditions in the euro zone

n     Though we expect Grasim standalone EBIDTA to decline over H2FY12 (led by lower VSF prices & high Base of H2FY11), we expect cement business to improve consol EBIDTA profile

n     Upgrade in Ultratech earnings along with higher volumes for VSF have led to earnings upgrade for FY12E/13E by 1%/1.2%. Maintain Accumulate with revised price target of Rs2700