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Grasim: Profits zoom on higher volumes & price recovery - Views on News from Equitymaster
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  • May 9, 2016 - Grasim: Profits zoom on higher volumes & price recovery

Grasim: Profits zoom on higher volumes & price recovery
May 9, 2016

Grasim Industries has announced its financial results for the quarter ended March 2016. During the quarter, the company's standalone sales and net profit report a sharp jump of 46.5% YoY and 573.5% YoY respectively. Here is our analysis of the results:

Performance summary
  • Standalone revenues increase by 46.5% YoY during 4QFY16, driven by higher volume as well as realizations in both VSF and chemical segment.
  • Operating profits increase by 260.1% YoY; operating margins expand from 7.5% in 4QFY15 to 18.3% in 4QFY16.
  • Net profit zooms up by 573.5% YoY during the quarter; net profit margin expands from 1.8% in 4QFY15 to 8.2% in 4QFY16.
  • During the full financial year 2015-16 (FY16), sales and net profit increased by 41.8% YoY and 79.9% YoY respectively.
  • The company's board of directors recommended dividend of Rs 22.5 per share of equity share of face value Rs 10 for the financial year FY16.

    Standalone financial performance snapshot
    (Rs m) 4QFY15 4QFY16 Change FY15 FY16 Change
    Net sales 17,332 25,396 46.5% 63,326 89,796 41.8%
    Expenditure 16,040 20,746 29.3% 56,676 74,009 30.6%
    Operating profit (EBITDA) 1,291 4,650 260.1% 6,650 15,787 137.4%
    EBITDA margin 7.5% 18.3% 10.5% 17.6%
    Other income 507 283 -44.2% 3,481 2,818 -19.0%
    Depreciation 843 1,287 52.6% 2,626 4,471 70.3%
    Finance costs 131 268 104.8% 393 1,474 274.8%
    Profit before tax & exceptional items 824 3,378 309.8% 7,112 12,659 78.0%
    Exceptional gain/ (loss) -262 -292 -262 -292
    Profit before tax 562 3,086 449.1% 6,849 12,367 80.6%
    Tax 252 1,001 296.4% 1,550 2,835 82.9%
    Effective tax rate 30.6% 29.6% 21.8% 22.4%
    Net Profit 310 2,086 573.5% 5,299 9,533 79.9%
    Net profit margin 1.8% 8.2% 8.4% 10.6%
    No of shares (m) 93.3
    Diluted EPS (Rs)* 102.1
    P/E (times)* 40.6

    *trailing twelve month earnings

  • What has driven performance in 4QFY16?

    • Grasim's standalone topline witnessed a rise of 46.5% YoY during the quarter ended March 2016. Viscose Staple Fibre (VSF) revenues increased by 23% YoY during the quarter driven by higher volumes and realisations. VSF sales volumes were higher by 10% YoY at about 130k metric tonnes during the quarter driven by strong demand from domestic segment and higher sale of specialty fibre. Realisations, too, improved on the back of uptrend in global fibre prices.
    • The chemical business reported 123% YoY increase in sales during the quarter mainly on account of the merger of Aditya Birla Chemicals (India) Ltd with Grasim effective from 01 April, 2015. Even on a like-for-like basis, the chemical segment grew by 42% YoY on account of lower availability of caustic soda in domestic markets and higher international prices.
    • During the quarter, operating profits increased by 260.1% YoY on account of lower operating cost driven by efficiency improvement and lower energy cost. Operating profit margins expanded from 7.5% in 4QFY15 to 18.3% in 4QFY16.
    • Depreciation charges and finance costs increased by 52.6% YoY and 104.8% YoY respectively.
    • Led by the healthy expansion in operating margins, the standalone net profit increased by 573.5% YoY. Net profit margins expanded from 1.8% in 4QFY15 to 8.2% in 4QFY16.
    • During the full financial year ended March 2016, the company's sales and net profit increased by 41.8% YoY and 79.9% YoY respectively.
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