The share price of Grasim Industries increased by about 40% on Thursday, reaching a 52-week high. More reason to be optimistic about earnings growth is the introduction of the Paint business.
The Aditya Birla Group Chairman, Kumar Mangalam Birla, announced on Thursday the introduction of goods and services under the new “Birla Opus” brand of decorative paints, with a goal of generating Rs. 10,000 crore in gross sales in three years of full-scale operations.
In a press release on Thursday, Grasim Industries said that Aditya Birla Group is expected to upend the paint market by adding 40% to its industry capacity.
In addition to introducing its paint line, Grasim is opening its first paint facility in Panipat. Three plants will be put into service in the upcoming 12 to 15 months, and two more plants around 4QFY24. The paint industry has already incurred over 60% of the Rs. 10,000 crore budgeted capital expenditure.
Analysts are still on the lookout. In a note, analysts at Jefferies India Pvt Ltd, who have a target price of ₹2300 for the stock trading at levels near ₹2165, stated that they are aware of the launch and initial plans for Grasim, the completion of the ground architecture plants, the details of the brand portfolio across multiple categories, the establishment of the supply chain, logistics, and distribution network, and the start of dealer onboarding. The company’s initial target markets are larger cities and villages; it will first target specific regions in the North and South near its factories before progressively expanding nationwide.
However, the market leadership (yearly milestones), loss funding (in the initial years), business mix (B2B and B2C), dealerships, tinting equipment, distribution (strategies), and branding/promotion would be the main topics of discussion with the management.
Meanwhile, investors’ trust is still high due to the company’s other companies, such as the cement division UltraTech Cement, which has promising business potential. Other analysts have continued to express confidence in the increase of earnings in this and other segments.
“They retain a Buy on Grasim with a revised target price of Rs. 2,600 as the pencil in upwardly revised UltraTech valuation and increased valuation of its other vital subsidiaries,” Sharekhan analysts stated following the release of the Q3 results.
As demand picks up, Sharekhan analysts predict that Grasim’s initiatives to boost asset productivity and concentrate on growing value-added goods will pay off. Grasim is expected to have more growth in the near future because to its rapid paints expansion and the robust momentum it is seeing in B2B e-commerce. Also, they noted that UltraTech, a significant subsidiary, continues to have a positive outlook.
