Jefferies puts a buy on Grasim with target of Rs 2270

Jefferies puts a buy on Grasim with target of Rs 2270

Jefferies has put a Buy rating on Grasim after it unveiled new paint brand- Opus with price target of Rs 2270. The company sees 17% upside potential.

According to Jefferies, the company would cross leverage group’s Wall Putty dealers to expand Paint reach initially. Ahead of the launch, Grasim piloted painting services in key metros. In the press release, the Chairman said, “endeavour is to become a profitable No. 2 player in the coming years.”

Further, a cutting-edge R&D facility has already been set up in Maharashtra and has spent Rs 3,600 crore till Q1FY24 out of Rs 10,000 crore capex planned. The company targets to commission three plants (2 in North, 1 in South India) with a capacity totaling 630MLPA in phased manner by end-of Q4FY24. Jefferies report adds that paints and B2B e-commerce ventures are new focus areas. In the past two-three years, Grasim has talked of building new businesses, targeting to utilise cash flows from standalone businesses to set up two new businesses, namely Decorative Paints and B2B e-commerce for building materials.

The company aims to replicate the success of its standalone business in emerging Paints and B2B e-commerce ventures, according to Jefferies. On unveiling the brand, Kumar Mangalam Birla, Chairman, Aditya Birla Group said, “Our foray into decorative paints is a strategic portfolio choice that enables us to tap into a high-growth market and expand our presence in the vibrant Indian consumer landscape. Our paints business will build on the power and trust associated with the Aditya Birla brand. The Company has over the last couple of years built a strong foundation to enable a successful business launch. We endeavour to become a profitable No. 2 player in the coming years and announcing our brand name is the first of many steps that will follow in this direction.”

The current estimated value of India’s decorative paints industry is Rs 70,000 crore, as stated in the press release. The paint industry is witnessing double- digit growth YoY, driven by rising consumer aspirations and the government’s push towards ‘Housing for All’, added Jefferies