The viscose staple fibre (VSF) division of Grasim Industries Ltd. has had a difficult time. Over the nine months ending in December, the segment’s performance suffered from a decrease in demand and an increase in input costs. The VSF business’s Ebitda margin is anticipated to decline year over year in FY23.
The business noted that the segment’s performance increased sequentially in the March quarter during its most recent analysts’ meeting. Demand has increased as a result of the Chinese economy’s openness. In addition, a compound annual growth rate of 8–10% is anticipated for VSF demand over the next few years. Be aware that Grasim holds around 90% of the domestic market for VSF.
According to a study by Jefferies India, Grasim talked about its (dominant) status in the important VSF and chemicals industry and calibrated expansion. prospects for different markets. The chemicals division of Grasim has been doing well. During the past few years, this business has been producing an annual free cash flow of 600–700 crore. For the past five years, return on capital employed has ranged between 19 and 22% “said Motilal Oswal Financial Services analysts. In FY23, Grasim anticipates spending approximately Rs. 1,500 crore on chemicals.
Yes, the stock is affected by the performance of the cement industry. After all, Grasim’s affiliate UltraTech Cement has a significant cement exposure. The company’s performance in the paints sector and B2B platform business will be crucially trackable for medium-term stock price performance, “a study from Antique Stock Broking stated. “We keep the FY23-25E Ebitda and Keep our target price at $1,950 based on an 8x FY25E EV/Ebitda on a standalone business (ex-paints/B2B platform) and a 40% Holdco discount on various assets that hasn’t altered, according to the study.
