Grasim Industries (GRAS.NS): June 2013: Beat on Core Driven by Lower Costs :Morgan Stanley Research
Quick Comment - Grasim reported standalone PBT at Rs2.4bn, down 28% YoY, but 25% higher than MSe of Rs1.9bn. The beat was driven by better than expected performance in the VSF segment (primarily given lower costs) and higher other income. Our EPS change factors lower than earlier expected earnings for cement business and lower margins in VSF business.
Standalone EBITDA declined 31% YoY to Rs2bn, but was 19% ahead of MSe,given lower costs and 7% beat on the revenues. EBITDA margins at 17.6% were down by 621bps YoY but were 180bps better than MSe.
Management re-iterated that the business environment remains volatile, with tough macro and increased global VSF production capacity and high cotton inventory. This will continue to have some pressure on realization. Over the next few quarters, while we expect some gains to Grasim from commissioning / ramp up of new capacity, realizations are unlikely to improve, which could limit margin gains.
Standalone revenue progression was better than expected: Grasim reported standalone revenues at Rs11.5bn (MSe Rs10.8bn), down 7% YoY. The beat was driven by better than expected volumes in both VSF and chemical segments. Realization was broadly in line with estimate, down ~2% QoQ, as global VSF prices remained weak. EBITDA margins declined 621bps YoY at 17.6%, though they improved 206bps QoQ. This was better than MSe of 800bps YoY decline - primarily aided by lower material costs, some of which could reverse in ensuing quarters. Core PAT however declined 17% YoY, given lower taxes, which we expect should reverse in quarters ahead. PAT was also supported by other income of Rs959mn, which grew 14% YoY.
On a consolidated basis, Grasim reported revenues of Rs69bn, 1% YoY growth. Core PBT at Rs11.1bn was down 20%, though was 4% ahead of MSe. EBITDA at Rs12.7bn, down 20% YoY, was broadly in line with MSe, given marginally lower EBITDA (vs. MSe) for cement subsidiary, Ultratech Cement.
Standalone EBITDA declined 31% YoY to Rs2bn, but was 19% ahead of MSe,given lower costs and 7% beat on the revenues. EBITDA margins at 17.6% were down by 621bps YoY but were 180bps better than MSe.
Management re-iterated that the business environment remains volatile, with tough macro and increased global VSF production capacity and high cotton inventory. This will continue to have some pressure on realization. Over the next few quarters, while we expect some gains to Grasim from commissioning / ramp up of new capacity, realizations are unlikely to improve, which could limit margin gains.
Standalone revenue progression was better than expected: Grasim reported standalone revenues at Rs11.5bn (MSe Rs10.8bn), down 7% YoY. The beat was driven by better than expected volumes in both VSF and chemical segments. Realization was broadly in line with estimate, down ~2% QoQ, as global VSF prices remained weak. EBITDA margins declined 621bps YoY at 17.6%, though they improved 206bps QoQ. This was better than MSe of 800bps YoY decline - primarily aided by lower material costs, some of which could reverse in ensuing quarters. Core PAT however declined 17% YoY, given lower taxes, which we expect should reverse in quarters ahead. PAT was also supported by other income of Rs959mn, which grew 14% YoY.
On a consolidated basis, Grasim reported revenues of Rs69bn, 1% YoY growth. Core PBT at Rs11.1bn was down 20%, though was 4% ahead of MSe. EBITDA at Rs12.7bn, down 20% YoY, was broadly in line with MSe, given marginally lower EBITDA (vs. MSe) for cement subsidiary, Ultratech Cement.
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