Grasim shares in focus after Q2 PAT declines 66% YoY

Synopsis

Grasim Industries witnessed a 66% decline in Q2 consolidated net profit, reaching Rs 389 crore, despite an 11% surge in revenue, reaching Rs 33,563 crore. This downturn is attributed to reduced profit margins in the cement sector and initial investments in the 'Birla Opus' paint business.

Shares of Grasim Industries will be in focus in Monday's trade after the company reported a 66% fall in its consolidated net profit at Rs 389 crore in the second quarter.

The company earned a revenue of Rs 33,563 crore for Q2FY25, up 11% YoY, driven by strong performance from its diversified business portfolio.

Its consolidated EBITDA stood at Rs 4,042 crore, while EBITDA margins were down to 17.9% due to narrow profit margins in the cement business and the upfront investments required to establish the consumer-facing paints business.

The CSF business achieved its highest-ever quarterly sales volume at 219 KT, up 4% YoY. The CFY business recorded a growth of 6% YoY, driven by festive demand. However, realizations remain under pressure due to low-priced imports from Chinese producers.

The chemicals business revenue stood at Rs. 2,054 crores, up 3% YoY and EBITDA up by 16% YoY due to the increased profits in chlorine derivatives and specialty chemicals.

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Specialty Chemicals (epoxy polymers and curing agents) revenue mix stood at 26% in Q2FY24.

The International average Caustic Soda (CFR-SEA) spot prices stood at $471/ton in Q2FY25, improving by 13%. The sales volume was down by 4% YoY due to reduced production at Vilayat, which resulted from a maintenance shutdown of the captive power plant.

The Building materials business reported revenue of Rs 16,683 crores, up 3.3% YoY. During the quarter, EBITDA was impacted by lower realisation in the cement business and initial investments in building a consumer-facing ‘Birla Opus’ brand in the Indian decorative paints market.

The budgeted standalone capex for FY25 is Rs 4,691 crore, of which Rs 2,997 crore are towards new growth businesses. The company has approved an investment of Rs 287 crore for additional pulp capacity at Harihar and Rs 20 crore for the textiles business.

The paints business under the brand name ‘Birla Opus’ is ramping production across product categories at three already commissioned plants in Ludhiana, Panipat and Cheyyar. Trial runs have also started at the Chamarajanagar and Mahad plant in Q2FY25.

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