GRASIM - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 2.7

📊 Core Financials

• Revenue & Profit Growth: Quarterly PAT improved to 805 Cr. from a loss of -118 Cr., but YoY profit variation is only 6.31%, showing weak growth.
• Margins: ROCE at 1.52% and ROE at 0.35% are very low, reflecting poor efficiency and profitability.
• Debt Ratios: Debt-to-equity at 0.24 is moderate, balance sheet remains manageable.
• Cash Flows: Dividend yield at 0.36% is minimal, suggesting limited shareholder returns despite large market cap.

💹 Valuation Indicators

• P/E Ratio: 557, extremely high compared to industry PE of 33.2, indicating severe overvaluation.
• P/B Ratio: Current Price / Book Value ≈ 3.5, trading at a premium to book value.
• PEG Ratio: -9.23, distorted due to weak earnings growth, making valuation unreliable.
• Intrinsic Value: Based on EPS (₹3.29) and industry PE, fair value ≈ ₹105–110, far below current price.

🏢 Business Model & Competitive Advantage

• Grasim Industries operates in cement, textiles, chemicals, and financial services through subsidiaries.
• Diversified portfolio provides exposure to multiple sectors, but profitability remains inconsistent.
• Competitive advantage lies in scale and group synergies, though weak return ratios dilute strength.

📈 Entry Zone & Holding Guidance

• Entry Zone: Attractive only below ₹2,200–2,300, closer to 52-week low and intrinsic value.
• Long-Term Holding: Risky due to poor profitability and extreme overvaluation; suitable only for high-risk investors.

✅ Positive

• Turnaround from loss (-118 Cr.) to profit (805 Cr.) in latest quarter.
• FII holdings increased (+0.58%), showing foreign investor confidence.
• Diversified business portfolio across cement, chemicals, and financial services.

⚠️ Limitation

• Extremely high P/E ratio (557) vs industry (33.2).
• Weak ROCE (1.52%) and ROE (0.35%).
• Dividend yield at 0.36% is minimal.
• Valuation metrics (PEG, intrinsic value) highlight severe overvaluation.

📉 Company Negative News

• DII holdings reduced (-0.64%), showing declining domestic institutional confidence.
• Profitability remains weak despite recent turnaround.

📢 Company Positive News

• Latest quarter shows recovery from losses to profitability.
• FII holdings increased (+0.58%), reflecting foreign investor support.

🏭 Industry

• Industry PE at 33.2, far below company’s distorted valuation.
• Cement and chemicals sectors benefit from infrastructure growth and industrial demand.
• Peers show stronger profitability compared to Grasim Industries.

🔎 Conclusion

• Grasim Industries faces weak fundamentals with poor profitability and extreme overvaluation.
• Short-term recovery in profits is positive, but sustainability is questionable.
• Entry only below ₹2,200–2,300 recommended; long-term holding is risky unless return ratios improve significantly.