StoxBox: Views on Grasim Industries Ltd. Q4 FY24 Result

By Parth Shah, Research Analyst, StoxBox

On an overall basis, Grasim Industries posted a decent result for the period ended March 2024, with building materials and financial services segments driving the overall growth of the company. However, the net profit of the company took a hit on an annual basis owing to a larger share of loss attributable to the chemicals segment. Considering the cellulose fiber segment, the revenue remained flattish mainly due to subdued domestic downstream demand on account of new MSME policy guidelines. However, various factors such as volume growth, lower input costs, global price movement of CSF cotton and increase in China operating rate led to such segment EBITDA growth. The chemical segment faced a downtrend mainly as the segment revenue and margins largely got affected by lower electro chemical unit (ECU) and chlorine derivative realisations. However, specialty chemicals segment performance was largely driven by higher sales volume and better contribution margins. Looking ahead at the paints business, various activities such as dealer meets and expos, dealer onboarding and tinting machine installations, painters and contractors’ engagement activities and advertisement and brand promotion carried out by the company will positively impact the paints business, thereby gradually increasing volume and sales realizations. Also, the positive feedback on ‘Birla Pivot Tiles and Plywood’ through accelerated distributor onboarding and in store branding depicts an increased brand visibility of Birla Pivot. Going ahead, the cement segment will face subdued demand owing to rains, thereby affecting profitability. With the market growing at a steady pace for Chlor Alkali segment and demand from chemical, textile and FMCG bound to grow coupled with projected capacity of 1.5 million MTPA by Q3FY25, the company is set to maintain its leadership position with respect to this segment. Hence, the various efforts being taken by the company to navigate the paints business, constant growth in the cement and financial services segment, and cellulosic fiber segment showing positive shift, we remain positive on Grasim Industries Ltd. in the medium to long term basis.

Grasim Industries Ltd. Q4FY24 Result First Cut – Stable growth witnessed in revenue and EBITDA

Consolidated Figures

  • The company earned a revenue of Rs. 37,727 crores for the quarter ended March 2024 (up 18% QoQ / up 13% YoY). The annual consolidated revenue stood at Rs. 1,30,978 crores compared to Rs. 11,7627 crores in FY23.
  • The company’s consolidated EBITDA stood at Rs. 5,769 crores for the March 2024 quarter (up 18% QoQ / up 24% YoY). The annual EBITDA for the company stood at Rs. 20,837 crores which grew 17.5% from the earlier period. Therefore, the consolidated EBITDA margin of the company for the quarter ended March 2024 stood at 15% and was 16% for FY24.
  • The company recorded a consolidated net profit of Rs. 2,722 crores for Q4FY24 (up 5% QoQ / up 15% YoY). The annual net profit of the company dropped to Rs. 9,926 crores from Rs. 11,078 crores in FY23 owing to a larger share of loss attributable to the chemicals segment. Hence, the net profit margin for the year dropped to 7.5%.
  • The consolidated diluted EPS stood at Rs. 20.65 for the quarter (down 10% QoQ / down 0.4% YoY). The annual EPS stood at Rs. 85.15 compared to Rs. 103.47 recorded for FY23.

Segment Results:

Cellulosic Fibre Segment:

The revenue from Cellulosic Fibre (CSF) segment for quarter ended March 2024 stood at Rs. 3,762 crores (up 1% QoQ / down 0.05% YoY) and segment EBITDA was Rs. 462 crores (up 15% QoQ / up 221% YoY). CSF capacity utilization remained greater than 95% due to domestic demand.

Chemicals Segment:

The chemicals segment recorded a revenue of Rs. 2,083 crores (up 4% QoQ / down 13% YoY). The segment EBITDA stood at Rs. 195 crores (down 26% QoQ / down 47% YoY). With the capacity addition of 123KTPA, the total capacity of specialty chemicals now stands at 246KTPA.

Building Materials Segment:

The building materials segment reported a segment revenue of Rs. 20,919 crores (up 23% QoQ / up 11% YoY), whereas the segment EBITDA stood at Rs. 4,150 crores (up 27% QoQ / up 24% YoY). The EBITDA per ton increased by Rs. 125/t to Rs. 1,185/t mainly due to lower fuel costs, operating leverages and increase in share of green power mix. The grey cement India sales volume for the company stood at 33.91 MT (up 31% QoQ / 11% YoY), however, the realizations stood at Rs. 5,170/MT (down 6% QoQ / down 4% YoY).

The cumulative capex since inception for paints business stands at Rs. 7,063 crores (approx. 70% of planned capital outlay) and the commercial production at three plants have begun as on April 2024.

Financial Services and Other Segments:

  • The consolidated revenue for the financial services segment stood at Rs. 10,483 crores (up 19% QoQ / up 29% YoY). The Net Interest Margin for FY24 improved by 6 bps to 6.90%, despite an increase in cost of funds of 88 bps. The company’s B2B platform for MSME’s Udyog Plus reached approx. Rs. 250 crores AUM and has clocked disbursements of approx. Rs. 500 crores.
  • The revenue from other businesses stood at Rs. 790 crores (up 5% QoQ / down 2.6% YoY). The textile business grew by 3% YoY to Rs. 534 crores, renewable segment revenue grew by 18% YoY to Rs. 112 crores and its cumulative installed capacity increased to 894MW.

Other Events

  • The board recommended a dividend of Rs. 10 per share for FY24.
  • During the quarter, the company issued 22,070,910 equity shares on right basis at Rs. 1,812 per share and Rs. 453 has been received on application.
  • The board has approved the merger of cement business of Kesoram Industries into Ultratech Cements Ltd., however, statutory and regulatory approval of the same is pending.
  • The company’s paint plants at Ludhiana, Panipat and Cheyyar are now operational and have commenced commercial operations on 30th April 2024.

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