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Arihant Capital
Grasim Ind (Hold)
CMP: ₹2,641.30
Target: ₹2,799
Grasim’s viscose staple fire (VSF) business continues to report subdued operating margins impacted by sluggish VSF prices and higher operating costs, even though demand remains healthy. We believe persistent overcapacity in China will continue to put pressure on VSF prices and thus margins of Grasim.
We forecast UltraTech’s margins profile, on the back of expected subdued pricing environment, likely to remain range-bound over next one year. We have valued Grasim Ind on some-of-the parts basis and have arrived at a fair value ₹615 a share.
We have valued Grasim’s 60 per cent stake in UltraTech Cement at ₹2,118 a share assuming 30 per cent holding company discount. We have valued equity investments at book value of ₹67 a share.
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