Multibagger Abrasive Stock Reports 24% Revenue Growth: Buy Stock With Rs. 2460 Target Price

Top brokerage firm ICICI Direct has given a buy rating to the stock of Grindwell Norton (GNL). The bluechip company has a market capitalization of Rs. 23,390 crore. This multibagger stock has given around 347% returns to the shareholders in the last 5 years.

Q2 Earnings

GNL reported a decent set of Q2FY23 numbers. Revenues came in at Rs. 634.7 crore, up 23.8% YoY, primarily aided by strong performance in the ceramics & plastic segment. EBITDA came in at Rs. 122.5 crore, up 21.2% YoY with margins at 19.3% while gross margins marginally declined by 20 bps to 53.5% YoY. Consequently, PAT grew 26.6% YoY to Rs. 90.1 crore.

Stock Valuation

Giving a buy rating, ICICI Direct stated, "Going forward, accelerated growth in performance plastics & ceramics and exports is expected to drive long term incremental growth. We remain long term positive and maintain our buy rating on the stock. We value GNL at Rs. 2460, that is 60x P/E on FY24E EPS."

Stock upside

Ambition to maintain market share in abrasives and increase market share in ceramic and plastics with gradual penetration of new value added products. High margin value added products and solutions oriented approach to drive margin expansion. We expect revenue, EBITDA to grow at a CAGR of 20.5%, 23.0%, respectively, over FY21-24E. Net debt free b/s, double-digit return ratios and strong cash generation is another key trigger for future price performance of the stock.

Company profile

Grindwell Norton (GNL) is the market leader in the India abrasive market with ~26% market share. The segments include abrasives (contributing ~57%), ceramics & plastics (33%) and IT services & others (10%). GNL has witnessed strong & positive free cash flows consistently over more than a decade irrespective of the macro environment. It has consistently operated with high (>16%) margins and return ratios.

Stock To Buy: Target Price

The Current Market Price (CMP) of Grindwell Norton (GNL) is around Rs. 2140. ICICI Direct has estimated a Target Price for the stock at Rs. 2460. This stock has the potential to give a 15% return, in the upcoming 12-18 months.

Stock Outlook
Current Market Price (CMP)	Rs. 2140
Target Price	Rs. 2460
Potential Upside	15.00%
52-week high share price	Rs. 2,328.35
52-week low share price	Rs. 1,451

 

Disclaimer

The above stock was picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.