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GRASIM - Fundamental Analysis: Financial Health & Valuation
Back to ListFundamental Rating: 3.4
| Stock Code | GRASIM | Market Cap | 1,86,303 Cr. | Current Price | 2,738 ₹ | High / Low | 2,979 ₹ |
| Stock P/E | 542 | Book Value | 808 ₹ | Dividend Yield | 0.37 % | ROCE | 1.52 % |
| ROE | 0.35 % | Face Value | 2.00 ₹ | DMA 50 | 2,798 ₹ | DMA 200 | 2,747 ₹ |
| Chg in FII Hold | 0.12 % | Chg in DII Hold | -0.28 % | PAT Qtr | 805 Cr. | PAT Prev Qtr | -118 Cr. |
| RSI | 42.4 | MACD | -2.59 | Volume | 1,95,812 | Avg Vol 1Wk | 8,14,226 |
| Low price | 2,301 ₹ | High price | 2,979 ₹ | PEG Ratio | -8.98 | Debt to equity | 0.24 |
| 52w Index | 64.4 % | Qtr Profit Var | 6.31 % | EPS | 3.29 ₹ | Industry PE | 30.0 |
📊 Core Financials
- Revenue & Profit Growth: Quarterly PAT improved to 805 Cr. from a loss of -118 Cr., but YoY profit variation is modest at 6.31%, showing weak consistency.
- Margins: ROE at 0.35% and ROCE at 1.52% reflect very poor profitability compared to industry peers.
- Debt Ratios: Debt-to-equity at 0.24 indicates moderate leverage, manageable but not negligible.
- Cash Flows: Cash generation is constrained by low return metrics despite large-scale operations.
- Return Metrics: EPS at 3.29 ₹ is extremely low relative to price, highlighting valuation concerns.
💹 Valuation Indicators
- P/E Ratio: 542, significantly above industry PE of 30.0, suggesting extreme overvaluation.
- P/B Ratio: ~3.4 (Current Price / Book Value), reasonable but overshadowed by weak earnings.
- PEG Ratio: -8.98, distorted due to poor earnings growth, signaling caution.
- Intrinsic Value: Current price (2,738 ₹) appears overvalued; downside risk remains unless profitability improves substantially.
🏢 Business Model & Competitive Advantage
- Diversified conglomerate with exposure to cement, textiles, chemicals, and financial services.
- Competitive advantage lies in scale, brand legacy, and diversified holdings.
- Weak profitability and high valuation metrics limit overall financial health.
📈 Entry Zone & Long-Term Guidance
- Entry Zone: Safer accumulation range between 2,300 ₹ – 2,450 ₹ (closer to 52-week low).
- Long-Term Holding: Suitable only for patient investors; improvement in profitability and margin expansion is critical before considering long-term holding.
Positive
- Turnaround from quarterly loss (-118 Cr.) to profit (805 Cr.).
- Diversified business portfolio across multiple sectors.
- Moderate debt-to-equity ratio (0.24).
Limitation
- Extremely high P/E ratio (542) compared to industry average.
- Very weak ROE (0.35%) and ROCE (1.52%).
- PEG ratio signals poor growth-adjusted valuation.
- Dividend yield at 0.37% is negligible.
Company Negative News
- Weak technical indicators (RSI 42.4, MACD -2.59) reflect bearish momentum.
- Reduction in DII holdings (-0.28%) shows cautious domestic sentiment.
Company Positive News
- Quarterly turnaround from loss to profit.
- Rising FII inflows (+0.12%) provide some support.
Industry
- Diversified conglomerates benefit from exposure to multiple sectors but face cyclical risks.
- Industry PE at 30.0 reflects moderate optimism and fair valuations.
Conclusion
- Grasim shows weak fundamentals with poor profitability and extreme valuation metrics.
- Turnaround in profitability is encouraging but sustainability remains uncertain.
- Best suited for cautious investors; safer entry near lower support levels with close monitoring of earnings and margin trends.
I can also prepare a comparison with peers like UltraTech Cement or Aditya Birla Capital to highlight how Grasim stacks up in terms of profitability and valuation.