Grasim Industries Ltd. – Value Analysis (BSE INDIA:500300) : October 6, 2017

Capitalcube gives Grasim Industries Ltd. a score of 59.

Our analysis is based on comparing Grasim Industries Ltd. with the following peers – Birla Corporation Limited, J.K. Cement Ltd., Ambuja Cements Limited, UltraTech Cement Limited, Century Textiles & Industries Ltd., Kakatiya Cement Sugar & Industries Ltd. and Bombay Dyeing & Manufacturing Co. Ltd. (500335-IN, 532644-IN, 500425-IN, 532538-IN, 500040-IN, 500234-IN and 500020-IN).

Investment Outlook

Grasim Industries Ltd. has a fundamental score of 59 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • It trades at a lower Price/Book multiple (1.84) than its peer median (2.71).
  • The market expects 500300-IN to grow more slowly than its peers and for its median ROE to decline.
  • 500300-IN has relatively high profit margins while operating with median asset turns.
  • Changes in annual earnings are in line with its chosen peers but lags in terms of revenue, implying the company is cost conscious and selective about spending for growth.
  • Over the last five years, 500300-IN‘s return on assets has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While 500300-IN‘s revenues growth in recent years has been around the peer median, the stock’s below peer median P/E ratio suggests that the market likely sees the company’s long-term growth prospects to be fading.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.
  • 500300-IN has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

500300-IN has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 15.76% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 29.17%), and a well-cushioned interest coverage level of 9.33x, 500300-IN can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 7 peers for the company have an outstanding debt balance.

500300-IN has maintained its Quick & Able profile from the recent year-end.

  • 500300-IN‘s interest coverage is its highest relative to the last five years and compares to a low of 3.46x in 2013.
  • Though its interest coverage increased to 9.33x from 7.92x (in 2017), its peer median remained relatively stable during this period at 4.30x.
  • Interest coverage rose 1.03 points relative to peers.
  • 500300-IN‘s debt-EV is similar to last year’s low of 15.76%, which compares to the 2013 high of 26.17%.
  • Compared to 2017, debt-EV has remained relatively stable for both the company (15.76%) and the peer median (29.17%).

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Birla Corporation Limited 45.78 1.59 1.44 11.85
J.K. Cement Ltd. 35.64 1.16 1.87 12.03
Ambuja Cements Limited 0.03 1.26 12.04 6968.89
UltraTech Cement Limited 7.69 1.6 6.73 42.25
Century Textiles & Industries Ltd. 32.7 0.51 1.24 6.26
Kakatiya Cement Sugar & Industries Ltd. 25.64 3.65 30.28 112.64
Bombay Dyeing & Manufacturing Co. Ltd. 63.42 0.85 0.16 -7.91
Grasim Industries Ltd 15.76 1.69 9.33 54.26
Peer Median 29.17 1.43 4.3 27.14
Best In Class 0.03 3.65 30.28 6968.89

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Company Profile

Grasim Industries Ltd. manufactures viscose staple fibre, cement, chemicals, and textiles. It operates through the following segments: Fibre & Pulp, Chemicals and Others. The Fibre and Pulp segment includes viscose staple fibre and rayon grade pulp. The Chemicals segment produces caustic soda, epoxy and other allied chemicals. The Others segment manufactures textiles such as fabrics and synthetic yarns. The company was founded on August 25, 1947 and is headquartered in Nagda, India.


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