Grasim Industries Shares Decline Ahead of Q3 FY25 Earnings; Analysts Predict Margin Pressure

Shares of Grasim Industries fell 0.5% during the trading session on February 9, ahead of its Q3 FY25 earnings announcement. Market analysts anticipate a mixed performance, with strong revenue growth but a sharp decline in net profit due to losses in the paints and business-to-business (B2B) segments.

Highlights:

• Grasim Industries stock was down 0.54% at ₹2,474 on the National Stock Exchange (NSE) at 11:27 AM.
• Revenue for Q3 FY25 is expected to increase 23.2% YoY to ₹7,883 crore, according to Nuvama Institutional Equities.
• Adjusted profit after tax (PAT) is projected to decline 79% YoY to ₹66 crore.
• EBITDA is likely to drop 11% YoY to ₹459 crore, as per Motilal Oswal Financial Services.
• The paints business and B2B segment are expected to impact overall margins negatively.

Market Expectations & Analyst Views

Revenue Growth But Sharp PAT Decline

According to Nuvama Institutional Equities, while Grasim Industries is expected to report 23.2% YoY growth in revenue, its profitability is under pressure. Adjusted PAT is projected to fall 79% YoY, primarily due to higher investments in the paints business and expansion in the B2B segment.

Segment-Wise Performance

Viscose Staple Fibre (VSF) & Chemicals

• VSF volume is expected to grow 7% YoY, reflecting strong demand.
• The chemical segment is likely to see a 2% YoY increase in volume.

Paints Business Performance

• The paints segment, which has been a key focus area for Grasim Industries, is expected to drag down revenues in Q3 FY25.
• In Q2 FY25, the company highlighted strong product feedback from dealers and contractors.
• Grasim aims to onboard 50,000 dealers by the end of FY25 and expand its distribution network to 150 depots (currently at 114).

B2B E-commerce Expansion – Birla Pivot

• Birla Pivot, the company’s B2B e-commerce platform for building materials, is on track to achieve $1 billion in revenue within three years.
• The platform has expanded across 35 product categories, offering over 40,000 products, and now delivers to 375 cities across 26 states and union territories.

Cement Industry Outlook – Weak Pricing Environment

• Analysts at Nuvama Institutional Equities predict an earnings downgrade for FY25E and FY26E due to pricing pressures and aggressive capacity expansion in the cement industry.
• Southern India is expected to see further consolidation due to its fragmented market structure.
• Softening fuel prices and cost efficiency measures could provide some relief, partially offsetting weak realizations.

Outlook for Grasim Industries

While Grasim Industries continues to show strong revenue growth, profitability remains under pressure due to new business investments. The paints and B2B segments are expected to be long-term growth drivers, but in the short term, they may weigh on margins and earnings.

Investors will be keenly watching the company’s Q3 FY25 earnings report to assess how Grasim navigates the challenges posed by rising costs and a weak pricing environment in the cement sector.