Grasim Industries share price rises 2%; is the stock buy-worthy after Q2 result?

Grasim Industries share price hit its 52-week high of ₹2,021.95 on October 12 this year and hit its 52-week low of ₹1,528 on March 16 this year. Year-to-date, the stock is up about 12.5 per cent.

Grasim on November 13 reported a 10 per cent increase in its Q2FY24 topline while its profit during the quarter rose by 15.3 per cent year-on-year (YoY).

Grasim Industries said its consolidated net profit for the second quarter rose 15.31 per cent from a year ago to ₹1,163.75 crore, aided by its cement and financial services businesses. Consolidated revenue from operations rose 10 per cent to ₹30,220.68 crore.

However, earnings before interest, taxes, depreciation, and amortization (Ebitda) on a consolidated basis slumped 19 per cent to ₹4,509 crore with a margin of 15 per cent, the company said in an exchange filing.

Also Read: Grasim Q2 net up 15% at ₹1,163 crore

We collated views of several brokerage firms and technical analysts to understand what investors should do with Grasim Industries stock. Take a look:

Fundamental views

Motilal Oswal has a buy call on Grasim Industries with a target price of ₹2,380.

“We maintain our FY24-26 estimates and believe that the fundraising of ₹4,000 crore through the rights issue will ease pressure on the balance sheet and help to pursue its growth plans,” Motilal Oswal said.

“We reiterate our buy rating on the stock with a target price of ₹2,380 as we value (1) its holding in subsidiary companies by assigning a discount of 35 per cent, (2) standalone business at seven times EV/EBITDA, and (3) investments into paints business at one time of investments,” Motilal Oswal added.

ICICI Securities upgraded Grasim Industries stock to a ‘buy’ from an ‘add’, with a revised target price of ₹2,332 from ₹1,933 earlier.

ICICI Securities said the outlook for all major business segments of Grasim Industries is on an improving trend.

“While the recovery in global prices of both VSF (Viscose Staple Fibre) as well as caustic soda (from their recent bottom) will help margin recovery for the standalone entity, firming up of pan-India cement prices augurs well for its major subsidiary UltraTech Cement (nearly 56 per cent of SoTP value),” said ICICI Securities.

“Also, the buzz around the new paints business is set to increase with its formal roll-out from Q4FY24. Given the prospects of robust revenue growth in its initial years, we value the segment at five times price/sales, being the average of top-five paint companies in India (assuming nearly ₹3,000 crore revenue in its first full year of operations, implying 15 per cent capacity utilisation),” said ICICI Securities.

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Technical views

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers

For the last seven to eight weeks, Grasim has been stuck in the tight range of ₹1,830–2,020. Patel pointed out that since the weekly DMI is positive and the weekly RSI has reversed from 50 levels, it might take out its resistance of ₹2,000 in the coming sessions.

“Going forward, one can add fresh longs above ₹2,000 for an upside target of ₹2,300 and a stop loss of ₹1,899 on a daily close basis,” said Patel.

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Gaurav Bissa, VP, InCred Equities

Grasim has been one of the most stable large-cap names in recent times. The stock has been inching higher on a gradual basis and witnessed short-term breakouts during its journey.

“The stock is now trading near a two-year breakout level and once it gives a weekly close above ₹2,000 level, it can move swiftly towards ₹2,200-2,300. Investors who have bought the stock are advised to hold the share whereas fresh buying is advised after the breakout is confirmed,” said Bissa.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.