Grasim – Q4FY20 Result
Total revenue from Ops 19,902 Cr
22,430 Cr (-11.23%) YoY | 19,205 Crs (-3.64%) QoQ
Standalone:
Total revenue from Ops 4,312 Cr
5,352 Cr (-19.43%) YoY | 4,449 Crs (-3.07%) QoQ
Cons:
Year ending revenue: 77,625 Cr Vs. 77,200 Crs (0.53%)
Standalone:
Year ending revenue: 18,609 Cr Vs. 20,550 Cr (-9.41%)
Cons:
PAT of Cr 2,305 Cr
1,563 Cr (47.61%) YoY | 1,039 Cr (121.77%) QoQ
Standalone
PAT of Cr 357.1 Cr
451.2 Cr (-20.81%) YoY | 184.7 Cr (94.07%) QoQ
Cons
Year ending Net Profit: 6,677 Cr Vs. 2,744 Crs (143.83%)
Standalone
Year ending Net Profit: 1,270 Cr Vs. 515 (146.62%)
Cons
EPS (in Rs.) 22.94
17.41 YoY |10.36 QoQ
Standalone
EPS (in Rs.) 5.44
6.88 YoY |2.81 QoQ
Cons EPS: 67.38 Vs. 25.74
Standalone EPS: 19.34 Vs. 7.84
View: Average result. Standalone YoY revenue and profit both have declined. However consolidated result going fairly well in this quarter. Consolidated result includes their subsidiaries viz. Ultratech performed well in this quarter.
Business Updates & Highlights
Consolidated EBITDA in Q4FY20 is around INR 3,243 Cr Vs. 3,999 Cr in Q4FY19 therefore declined by 18.9% in YoY. FY20 is EBITDA is around INR 13,846 Cr Vs. 13,404 Cr in Q4FY19 therefore declined by 3.3% due to strong performance by their subsidiary Ultratech cement business.
Viscose Business
For the full year, the Viscose business delivered the highest ever sales volume of 554KT of VSF recording a growth of 2.4%, despite a decline of 18% YoY in the month of March’20 on account of nationwide lock down. Production and sales volume of VSF business were sustained at 131KT and 136KT respectively during Q4FY20 despite the lock down.
The Net Revenue for the viscose segment (including VFY) stood at INR 2,102 Cr. and EBITDA for the quarter stood at INR 261 Cr.
During the year, the Company successfully commissioned it’s 3rd generation lyocell fiber plant of 45 TPD capacity and has achieved full capacity utilization. The company markets this specialty fiber under its’ brand name - ‘Excel’ Fiber.
Chemical Business
The Net Revenue for Q4FY20 stood at INR 1,290 Cr. and EBITDA stood at INR 104 Cr. Global caustic soda prices further softened during the quarter. The domestic realisation was impacted by weak industry demand, surge in imports and ramping up of new capacities. capacity, rise in imports and weak demand.
The slowdown in end user industry demand has impacted the sale of Chlorine and its value added derivatives
Capex Plan
The total capex plan of INR 7,800 Cr. (at standalone level) is under execution for raising capacities in both the VSF and Chemical businesses. The Capex plants are currently being reviewed.
Cement Subsidiary
UltraTech’s financial performance for FY20: Consolidated Revenue of INR 42,125 Cr., EBITDA of INR 9,930 Cr. an increase of 27% YoY and Normalised PAT of INR 3,703 Cr. an increase of 54%. The consolidated sales volume stood at ~82.33 MTPA.
For Q4FY20 the Consolidated Revenue was INR 10,746 Cr., EBITDA of INR 2,639 Cr. and Normalised PAT of INR 1,131 Cr. in Q4FY20. The consolidated sales volume stood at ~21.44 MTPA.
Financial Services Subsidiary
Revenue and net profit after minority interest for FY20 stood at INR 16,792 Cr. and INR 920 Cr. For the fourth quarter, the company reported revenue of INR 4,845 Cr. and net profit after minority interest of INR 144 Cr.
In Life Insurance business (FY20), Total Gross premium was up 7% to INR 8,010 Cr. and Renewal premium was up 21% to INR 4,353 Cr., 13th month persistency was at 83%
In the Health Insurance business, Gross written premium increased to INR 872 Cr. (FY20), up 76% YoY with retail mix at 72% vs. 65% in previous year.
The Board have recommended a dividend @ 200% i.e Rs 4 per share (face value of Rs 2 each), subject to approval of shareholders at Annual General Meeting
Financial
ROE and ROCE is around 3.5% and 10% respectively and book value per share is around INR 870 and share is currently trading at 1.28x of its book value. Company is currently trading at annualized PE of around 10 which is average as per Industry benchmark. Promoter holding in the company is around 40.2%, FIIs and mutual fund hold and insurance cos hold around 13.5%, 9.65% and 12.9% respectively. The company generated net cash flow from operations of INR 3,519 Cr. on standalone basis in FY20 (before meeting its capex spend of over INR 2,800 Cr.)
Share price high 958 and now 602. Grasim Industries is engaged primarily in Viscose (Pulp, Fibre and Yarn), Chemicals (Caustic Soda, Epoxy and allied Chemicals) and others (Insulators, Textiles, Fertilisers and Solar Power Designing, Engineering Procurement and Commissioning). As an consolidated company hold Ultra Tech Cement (60.2%) – CMP 3,800 and Aditya birla capital (55.9%) – CMP 55. Ultra Tech cement largest cement company in the country.
Share support price is INR 580. Long term investor should continue with the company.
Opportunities: Company has strong hold on their Chemicals, Viscose business. Liva brand for VSF products continues to grow its reach in the domestic market, partnering with over 40 retail brands and is available at over 3,600 outlets. The benefit of falling pulp prices will get reflected in the coming quarters due to lag in inventory consumption. The Caustic Soda capacity expansion projects at Rehla, Vilayat and Balabhadrapuram are at different stages of execution with expansion of specialty chemical products too. Ultractech one of the Flagship subsidiary which is cover more than 54% in their topline and 55% in bottom line doing fairly well in QoQ and YoY.
Risk: Overall debt is increasing in QoQ, Domestic caustic prices were impacted due to increased domestic capacity, rise in imports and weak demand. Rupee depreciation is also impacting the margin.
The slowdown in end user industry demand has impacted the sale of Chlorine and its value added derivatives. Consequent to the national lockdown across country, all operations of the Company were suspended except at the fertilizer plant in Jagdishpur (U.P). Operations have since partially resumed across the businesses. Q1 and Q2 FY21 can be more challengeable due to ongoing pandemic across the globe.
Sources:
Various publications
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