TOP GAINER ON NIFTY! Grasim Share price rises up over 3% to NEW LIFE HIGHS, KNOW the reason

Grasim share price today is Rs 1507, up Rs 48 or 3.3%. Market cap of Grasim Industries rises to nearly 1 lk cr. Grasim Share price made new life high today. The 52 week low on Grasim Share price is Rs 565.
Sharekhan says Grasim’s operating profit rose 149% yoy to Rs 811 cr (up 25.8% qoq). Strong operational performance led to a standalone net profit growth of almost 4x yoy (up 40.7% qoq) to Rs 503.5 crore.

Grasim’s management is hopeful of a V-shaped demand recovery once COVID-led restrictions are reversed. However, rising pulp prices and lowering VSF prices may lead to lower operating margins for the viscose division in the coming quarters. On the chemical business front, caustic prices are expected to improve gradually. Grasim has outlined capex of Rs 2604 cr (excluding paints business) for FY2022 towards VSF (600TPD - one line each to be completed in Q2FY2022 and Q3FY2022), chlor-alkali (200TPD brownfield capex to be completed over 24 months) and epoxy (125KTPA brownfield capex).

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Grasim would be incurring additional capex on land acquisition for plant in paints and has maintained its guidance of an Rs 5000 cr investment over three years. The company expects fertilizer business sale to conclude and receive funds by September 2021. Grasim also announced a special dividend of Rs 4 per share apart from Rs 5 per share for FY2021. Sharekhan expects Grasim to benefit from a strong growth outlook for the standalone business and Ultratech apart from getting a premium valuation for its foray into the paints business. Hence, Sharekhan maintains Buy rating on the stock with unchanged price target of Rs 1680.

Sharekhan highlights Key positives, Negatives and Risks for Grasim Share price.

Grasim Key positives:

Strong operational performance by Viscose division
Expect demand recovery to be as sharp as seen last year with reversal in covid led restrictions
International demand outlook remain strong

Grasim Key negatives:

Chemical OPM affected sequentially by increased cost

Grasim Key Risks:

Funding requirement of its group companies & weakness in standalone business are key risks