Grasim Industries Ltd's Q1FY20 standalone Adj. Net profit declines 31.6% yoy to Rs439.5cr : In-line with Estimates

The company’s standalone revenue stood at Rs5,000.6cr, up 4.4% yoy but down 6.6% qoq.

Aug 14, 2019 09:08 IST India Infoline Research Team

Grasim Industries Ltd Q1FY20

Standalone Results Q1FY20: (Rs. in cr)

Q1FY20 YoY (%)
Revenue 5,000.6 4.4
EBITDA 843.7 [21.8]
EBITDA Margin (%) 16.9 [565]
Net Profit (adjusted) 439.5 [31.6]
***EBITDA margin change is bps
Grasim's (Standalone) numbers for Q1FY20 were broadly in-line with consensus estimates. Revenue for the quarter was up 4.4% yoy to Rs5,000.6cr. On account of higher raw material cost and operating expenses, EBITDA declined by 21.8% yoy to Rs843.7cr with 565bps yoy contraction in EBITDA margin which stood at 16.9%. During the quarter, company impaired its investment of Rs290.2cr in Aditya Birla Idea Payment Bank Limited (ABIPBL), reported as an exceptional item. Adjusting for the exceptional item, the Adj. PAT declined by 31.6% yoy to Rs439.5cr.

VSF segment
  • The Viscose Business reported net revenue of Rs2,509.1cr, up 1.2% yoy. EBIT for the segment declined 31.7% yoy with 649bps contraction in EBIT margin.
  • The VSF business reported production and sales volume of 140KT and 138KT respectively recording an increase of 4% yoy and 5% yoy respectively.
  • Profitability for the segment was impacted as the Chinese VSF prices saw a sharp decline of ~21% yoy and ~8% qoq. This was on account of new capacities commissioned in recent past (CY2018) and the negative impact of US China Trade War.
  • Further, currency depreciation also put pressure on the profitability which partly offset the gains of reduction in pulp prices which is currently trending downwards.
  • The Brownfield capacity expansion plan of 219 KTPA at Vilayat is progressing well with construction work in full swing, scheduled to be commissioned in FY21.
  • Liva partners with over 40 retail brands and is available across 3,500 outlets in Exclusive Business Outlets and Large Format Stores in addition to many more MBOs in 250 cities of India.
 
Chemical segment
  • Chemical segment’s net revenue for the quarter declined by 4.8% yoy to Rs1,503.5cr with 12.8% yoy decline in EBIT.
  • For Q1FY20, the production and sales volume of 238KT and 242KT respectively recorded an increase of 1% yoy and 2% yoy respectively. Production was impacted at different sites on account of water shortage and minor disruptions caused by cyclones.
  • Softening of Caustic Soda prices globally put pressure on prices in domestic markets, which in turn led to lower profitability.
  • The company is in the process of implementing approved capacity expansion plan from 1,147 KTPA to 1,457 KTPA at multiple locations and the same are in different stages of execution.
The total capex plan of Rs7,800cr (at standalone level) is under execution for raising capacities in both the VSF and Chemical businesses, apart from ongoing modernisation capex at various plants. This capital expenditure will be incurred over FY20-22E.
 
 





Technical View:

Grasim Industries Ltd is currently trading at Rs. 733.65, up by 23.95 points or 3.37% from its previous closing of Rs. 709.70 on the BSE.
The scrip opened at Rs. 711 and has touched a high and low of Rs. 744 and Rs. 711 respectively. So far 29,44,453 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 50 DMA.

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