In Q2 FY24, Grasim Industries Ltd.’s Ebitda came 9% below our estimates due to lower margins in the chemical segment; though viscose staple fibre performed better than our estimates with Ebitda/kg of Rs 21 versus estimated Rs 18. Higher other income and lower effective tax rate helped 4%/22% beat on profit before tax/profits.
There has not been much improvement in VSF prices and global demand scenario. Domestic demand improved on expectation of pick-up in textiles demand during the festive season. The chemical business margins were affected by increased maintenance costs attributed to operational issues within the chlorine plant.
Grasim will launch paints in Q4 FY24 and three of its plants (out of six plants planned) will become operational in the quarter.
We maintain our FY24-26 estimates and believe that the fundraise of Rs 40 billion through rights Issue will ease pressure on the balance sheet and help to pursue its growth plans. We reiterate our ‘Buy’ rating on the stock.