Grindwell Norton - Grinding Innovation; Initiating Coverage :: Edelweiss PDF report link

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Grindwell Norton (GNW) is India’s second largest manufacturer of abrasives and ceramics and enjoys healthy domestic market share of ~25%. Also, it is a lead player in silicon carbide grains in India. We believe GNW is well-poised to ride the strong industrial cycle uptick drawing from sound global parentage — parent Saint-Gobain is global leader in abrasives, electrominerals and the 100th most innovative player in the world. The company’s financial track record is impressive too. In the past ten years, it clocked strong 15% CAGR each in sales and PAT along with 17% EBITDA margin and average RoCE of ~30%. Going ahead, in view of 70% gross block expansion over FY10-14, current utilisation at ~55-70% of sales, focus on new product launches (35% of sales) and parent’s target of tripling group sales in India (20% CAGR) by 2019, we expect GWN to record 20% and 30% sales and PAT CAGR over FY14-17E, respectively.

Strong innovation led model backed by strong parentage

GWN’s sound global parent, leadership position in India (alongside CUMI) and strong innovation led model holds it in good stead. While products introduced five years back contribute ~35% to sales, customised products account for ~20-25% of sales. Overall, its global parentage and strong R&D set up in India provides GWN the lynchpin for 20% and 30% CAGR in sales and PAT over FY14-17E, respectively.

Mission India: Sales to triple by 2019

GWN witnessed gross block expansion of 70% over FY10-14 led by parent’s target to triple group sales (20% CAGR to INR100bn) by 2019. Further, with current capacity utilisation of ~55-70%, we believe GWN is well placed to ride the cyclical uptick.

LINKhttps://www.edelweiss.in/research/Grindwell-Norton--Grinding-Innovation;-Initiating-Coverage/27257.html