Grasim Industries: Improved performance in Q1FY16 #BrokerAdvice http://goo.gl/RlXhTU

1. GRASIM INDUSTRIES LIMITED
Current Price:
Price (`) 3768.20
52 W H/L( ) 4023.60/3222.60
Mkt. Cap.( Cr) 34612.35
Latest Equity(Subscribed) 91.85
Latest Reserve (cons.) 22988.71
Latest EPS (cons.) -Unit Curr. 190.30
Latest P/E Ratio -cons 19.80
LatestBookvalue(cons.)-UnitCurr. 2512.75
Latest P/BV - cons 1.50
Dividend Yield -% 0.48
Face Value 10.00
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VALUE PARAMETERS
Consolidated Results
In Cr.
`3768.20`3768.20
STOCK DATA
BSE Code 500300
NSE Symbol GRASIM
Reuters GRAS.BO
Bloomberg GRASIM IN
SHARE HOLDING PATTERN (%)
Description as on % of Holding
30/06/2015
Foreign 40.35
Institutions 17.57
Govt Holding 0.00
Non Promoter Corp. Hold. 6.76
Promoters 25.51
Public & Others 9.81
Grasim Industries, a flagship company of the Aditya Birla Group,has reported improved
performance for the quarter ended June 2015, amidst challenging market conditions. Its
consolidated net profit declined by 1% to `484.67 crore despite 7% jump in revenue to
8599.07 crore. OPM improved by 130 bps to 16.5%, due to drop in raw material and power &
fuel cost partially offset by rise in freight and employee cost, thus, operating profit inclined by
16% to 1417.06 crore. With gain in interest outgo by 35% to 171.30 crore and depreciation
by 13% to 403.04 crore, the PBT dropped by 5% to 956.64 crore.
Consolidated results for the June quarter
Topline jumps 7%-Consolidated net sales revenue of the company jumped 7% to 8599.07
crore for the first quarter ended June 2015, aided by growth in turnover for all three businesses,
notably the VSF segment.
The revenue from cement (Grey, White and Allied Products) division (contributes 74% of total
revenue) grew 7% to 6432.15 crore, Viscose Staple Fibre and Wood Pulp division (contributes
19% of total revenue) rose 7% to 1664.37 crore and Chemicals (Caustic Soda and Allied
Chemicals) segment (contributes 6% of total revenue) climbed 17% to 485.18 crore. Revenue
from other segments (constitutes mainly textiles and contributes 2% of total revenue) fell 8%
to 136.65 crore.
OPM improves to 16.5% - Operating margin (OPM) inclined 130 bps to 16.5%. The
improvement in OPM seems largely on account of decrease in power & fuel costs by 240 bps to
17.6%, raw material cost by 100 bps to 23.3%, and other cost by 40 bps to 14.7% as
percentage to sales and net of stock adjustments. However, freight & handling costs increased
by 210 bps to 19.7% and employee benefits cost jumped 30 bps to 6.5% during the period. As a
result, operating profit advanced by 16% at 1417.06 crore.
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Particulars Qtr Ending Qtr Ending Var.
June 15 14 (%)
Total Income 8599.07 8045.04 7
OPM (%) 16.48 15.14 9
OP 1417.06 1218.22 16
Other income 113.92 269.61 -58
PBIDT 1530.98 1487.83 3
Net Finance Charges 171.30 126.49 35
PBDT 1359.68 1361.34 0
Depreciation 403.04 357.76 13
PBT 956.64 1003.58 -5
Tax expense 281.07 304.05 -8
PAT 675.57 699.53 -3
Minority Interest 234.77 250.30 -6
Share of Profit of Associates 43.87 37.90 16
Profit after Minority Interest and
Share of profit of Associates
EPS (`) 52.76 53.04
June
484.67 487.13 -1
August 11, 2015

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At segment level, PBIT of cement business gained 14% to 921.52 crore and Chemicals
business rose 4% to 69.60 crore, while VSFand Wood Pulp business PBIT zoomed to 68.77
crore from 19.81 crore in previous corresponding quarter.The margins of cement business
escalated 90 bps to 14.3%, while the VSF and Wood Pulp businessmargins grew 290 bps to
4.1% while margin of chemicals business sank 180 bps to 14.3%.
Bottomline falls 1% on higher interest, depreciation- The other income was down 58%
to 113.92 crore, thus the PBIDT rose by 3% to 1530.98 crore. The Company interest cost
jumped 35% to 171.30and depreciation rose13% to 403.04 crore.Thus, the PBT shrank by
5% to 956.64 crore. The effective tax rate was down 90 bps to 29.4% during the quarter, thus,
Tax Expense declined 8% to Rs 281.07 crore. After deducting tax expenses, the PAT before MI
and Share of profits from Associate declined by 3% to 675.57 crore. After accounting Minority
interest of Rs 234.77 crore, down 6%, and Share of profits from associates of 43.87 crore, up
16%, respectively, Consolidated Net Profit was down 1% to 484.67 crore.
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Consolidated Results
In Cr.
Particulars Qtr Ending Qtr Ending % Var.
June 15 June 14 total (%)
Segment Revenue
Viscose Staple Fibre and Wood Pulp 1664.37 1558.58 19 7
Cement - Grey, White and Allied Products 6432.15 6032.36 74 7
Chemicals-CausticSodaandAlliedChemicals 485.18 414.20 6 17
Others 136.65 148.57 2 -8
Total 8718.35 8153.71 100 7
Less: Inter-segment Revenue 119.28 108.67 13
Net Sales/Income from Operations 8599.07 8045.04 10
Segment Results
(Profit before Finance Cost & Taxes)
Viscose Staple Fibre and Wood Pulp 68.77 19.81 6 247
Cement - Grey, White and Allied Products 921.52 809.38 86 14
Chemicals - Caustic Soda and Allied Chemicals 69.60 66.83 6 4
Others 11.56 10.70 1 8
Total 1071.45 906.72 100 18
Less: Finance Costs 171.30 126.49 35
Net Unallocable Income/ (Expenditure) 56.49 223.35 -75
Total Profit before EO and tax 956.64 1003.58 -5
Add: EO 0.00 0.00
Profit before Tax 956.64 1003.58 -5
Capital Employed
(Segment Assets-Segment Liabilities)
Viscose Staple Fibre and Wood Pulp 6979.85 7167.01 15 -3
Cement - Grey, White and Allied Products 30472.83 28197.99 65 8
Chemicals - Caustic Soda and Allied Chemicals 1949.04 1869.58 4 4
Others 318.08 287.57 1 11
Unallocated 6803.86 6684.11 15 2
Total 46523.66 44206.26 100 5
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Viscose Staple Fibre (VSF)
Revenue increased by 15% driven by higher sales volume at 103K MT, up 19%. EBIDTA surged
by 72% at 139 crore. with expanded volumes and a decline in pulp and other input cost. The
production at the newly commissioned Vilayat plant has ramped up. It achieved a capacity
utilisation of ~82%. The volume growth would have been higher, had there been no plant
stoppage at Nagda for two months due to the water shortage. Operations at Nagda resumed
from the last week of June 2015.
Chemical Business
In the Chemical business, revenue soared by 17% as Epoxy volume almost doubled with
ramping up of plant utilisation. Caustic soda sales volume was maintained at 98K Tons. EBITDA
increased by 3% at 94 crore.
The merger scheme of Aditya Birla Chemicals India Ltd. (ABCIL) with the Company has been
approved by the Shareholders and Creditors of both the Companies. Post-merger, the caustic
soda capacity of the Company will increase from 452K TPA to 804K TPA. The scheme will be
effective from 1st April, 2015 upon receipt of requisite regulatory approvals inter-alia from
Competition Commission of India and High courts, expected by Q3 FY16. Therefore, the
Company's results do not include EBITDA of 78 crore. and PAT of 20 crore. reported by ABCIL
for the current quarter.
Cement Subsidiary (UltraTech Cement)
Amidst subdued demand in the Cement sector due to slowdown in construction activities,
UltraTech Cement has reported better performance. Its revenue for the quarter stood at 6,432
crore, up by 7% as compared to 6,032 crore in the corresponding quarter last year. The
combined cement and clinker sales volume was 13.0 million tonnes against 12.4 million tonnes
last year. EBITDA was 1,282 crore ( 1,296 crore) and Net profit was 591 crore ( 627 crore).
With the reduction in fuel pricesand higher pet coke consumption, energy costs declined by 7%.
Its benefit was partially offset by the increase in railway freight. Input prices remained stable,
except for the rise in royalty on limestone and levies under the Mines and Mineral (Development
and Regulation) Amendment Act, 2015.
Outlook
In the VSF business, prices are likely to be influenced by the development in the industry
inChina amidst increase in the input prices and resumption of operations at some of the shut
capacities. The Company's new plant at Vilayat with a higher share of speciality product will
improve its product mix and realisations. The recently launched brand 'Liva' has met with good
response from value chain and consumers. The Company is closely working with the brands,
designers and retailers to expand its domestic market.
In the Chemical business, the scale of operations will rise significantly post the merger of
ABCILwith the Company.
In Cement, the demand is expected to be higher with the Government's focus on
infrastructuredevelopment, housing sector, smart cities etc. and the softening of interest rates.
The Companyis well positioned across the country to cater growth in demand.The Company
enjoys a leadership position in all its businesses: Cement, Viscose Staple Fibre andChemicals,
which has been further strengthened having made an investment of US$4 billion overlast five
years. The Company is well poised to reap the benefits of these investments withramping up of
capacity utilisation and expected upturn in the business cycle led byaccelerated growth in the
economy.
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