4 GRASIM share price target reports by brokerages below. See what is analyst's view on GRASIM share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
We reduce our FY20/FY21 estimates by 16% in light of weaker realizations of VSF and the Chemical business. We expect EPS to register a decline in CAGR of 21% over FY19-21; ROE should decline 280bp to 4.1% over FY19-21 due to margin pressure as well as higher depreciation and interest cost due to capacity addition. Given GRASIM’s conglomerate business structure, we value it on SOTP basis. Our target price values (a) the standalone business (fiber, chemicals, etc.) at 7x FY21E P/E, (b) UltraTech at 60% holding company discount to target price, and (c) other listed investments (AB Capital, Vodafone Idea, Hindalco, Aditya Birla Fashion) at 60% holding company discount to market prices. Thus, we arrive at a fair value of INR740/share. Maintain Neutral.
Valuation – Maintain Hold with a revised PT of Rs. 850: Grasim has risen by ~10% over less than a fortnight with two developments in the telecom sector and an increase in Aditya Birla Capital’s market capitalisation (up ~34%, Grasim holds ~56% stake). We see the developments in the telecom sector to bring sanity for the sector and are positive over a long term for VIL; however, reduction of licensee fees and payment of AGR-related dues in less than three months have remained unaddressed. Hence, we continue to believe VIL’s funding requirements to remain a key hangover on Grasim. We have introduced FY2022E standalone estimates in this note. We continue to maintain Hold on the stock with a revised PT of Rs. 850 (factoring revised valuation of VIL, Aditya Birla Capital and rolling forward standalone estimate valuation to FY2022E).
We estimate PAT to grow at 14.0% FY19-21E CAGR and EBITDA margin to improve to 21.0% by FY21E. We reiterate our BUY rating on the stock with a revised target price of Rs. 803 calculated using sum of the parts (SOTP) valuation methodology (SOTP table on page 2), taking into account the market potential, business environment and growth prospects.
Maintain Buy with revised PT of Rs. 955: We have lowered our net earnings estimates for FY2020-FY2021E factoring lower realizations in Viscose and Chemical verticals along with increased interest expense due to increase in debt. The funding requirements of Grasim’s investment in Vodafone Idea has been key overhang on the stock leading to increased discounting of its other listed entities. We have adjusted our SOTP based price target for current market capitalization of Aditya Birla Capital and Vodafone Idea. We have also increased holding company discount due to key funding concern for Vodafone Idea. Hence, we arrive at a revised SOTP based price target of Rs. 955. However, we maintain Buy purely on the basis of attractive valuation post steep discounting of listed subsidiaries and investments.
Outlook and valuation: Value play; maintain ‘BUY’ We maintain that Grasim is a unique holdco with a solid underlying SA business. Yet capital commitments towards Idea (~INR29bn for a steady 11.5% stake) and potential infusion into ABCL (plans yet to be firmed up) are likely to overhang the stock. Maintain ‘BUY/SP’ with an SOTP-based target price of INR988 (valuing SA at 8x FY20E P/E and all key holdings at a 50% holdco discount to our respective fair value estimates).
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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