Grasim Industries(BSE Code 500300)

A knowledgeable HNI has turned bullish on Grasim and has started accommodating its shares. According to him, there are factors that will drive growth of the leading Aditya Birla group company in the current year as well as going ahead.

First of all the government’s liberal relief package to the telecom sector will prove highly beneficial to Grasim which holds a sizeable stake in Vodafone Idea which will now not only avoids bankruptcy but also gets fairly longer period to better manage its cash flows.

The boom in chemicals segment will also give a big boost to Grasim’s topline as well as bottomline. The markets upswing in caustic soda prices is turning out a big benefit to the company.

Again VSF (viscose staple fibre) which is facing slack demand of late has stated with cotton and marketmen feel that VSF prices will soon start looking up. The rise in cotton prices will lead to an increase in VSF prices.

Another positive trigger for the company is its imminent foray into the decorative paints business with an initial capex of Rs. 5000 crore over three years. The company plans to leverage its Birla white – market leader in white cement now being manufactured by Grasim’s subsidiary Ultratech Cement.

Though there are formidable players like Asian Paints and Akzo Noble Paints but the paints market is very large amounting to over Rs. 40,000 crore and Grasim will easily get its due market share once it goes on stream.

CMP Rs. 1641.00, 52 week H/L Rs. 1694/733, BV Rs. 991.00, FV Rs. 02)

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GNA Axles Ltd. (BSE Code 540124)

A research analyst with a leading brokerage house is strongly on GNA Axles, a leading manufacturer of a wide variety of axle shafts. According to her the company is heading for a bull run as growth momentum is most likely to pick up now. With the global economy opening up post Covid-19 induced restrictions, the pace of growth in the commercial vehicle segment will be quickened in India and move so in the USA and Europe. The US market contributes about 40 per cent of GNA’s revenue today and Europe which contributes around 15.5 per cent of revenues have started witnessing remarkable demand recovery in truck volumes and this augurs well for GNA. Even India has registered a sharp jump in domestic CV volumes during the last couple of months and the pace of demand will quicken going ahead.

Again GNA’s foray into the sports utility vehicles would act an incremental growth driver going forward. The company will supply SUV axle shafts to its existing CV customers in export markets that are already into the SUV business and benefit from its existing relationships. The LCV segment is also expected to contribute to new revenue streams.

Moreover, GNA has dominant market share (over 50 per cent) in supplying rear axle shafts, spindles and drive shafts to domestic tractor and CV segments. Domestic tractor markets are expected to remain buoyant because of higher farm income and favourable monsoon this year.

(CMP Rs. 1009.00, 52 week H/L Rs. 1456/222, BV Rs. 241.00, FV Rs. 10)

Sundram Fasteners (BSE Code 500403)

A septuagerian stock broker based in Chennai and a an erstwhile leading broker of the former Madras Stock Exchange is bullish on Sundaram Fasteners. According to him the company’s performance is strong outpacing the automobile industry’s growth through diversifying client and product portfolios, benefitting from its established client relationships and product capital allocation.

The company is well positioned to benefit from the technological shift in the industry towards electric vehicle (EV), lightweight and high strength components. The company has completed its major capacity expansion in the fiscal year 2020 and is expected to increase in asset turnover with minimum investment.

Again the company’s order book is robust with sectors such as farm implements, printed circuit boards and industrial power generation growing rapidly. Domestic original equipment orders have improved more than 90 per cent of pro-Covid levels across segments with CV segments showing strong signs of recovery. The company is witnessing robust demand from developed markets and customers in the US and Europe is looking at India vis-à-vis traditional source such as China is focusing on a diversified product range from EVs to non-autos including aerospace, defence, wind and solar and expects growth through new customers and new products.

Again the company is planning to foray into new businesses such as EV, aerospace and defence, realizing that there is huge potential in these emerging sectors . The stock broker expects the company grow ahead with earnings CAGR improving by 39.2 per cent during the fiscal 2021-23, driven by 30.5 per cent revenue CAGR and 40 bps improvement in EBITDA margin to 18.6 per cent in fiscal 2023 from 18.2 per cent in the FY2021. “I expect double digit growth in the FY 2022 and will not be surprised if the stock price enters four digit space very soon.

(CMP Rs. 923.00, 52 week H/L Rs. 959/398, BV Rs. 112.00, FV Re. 01)

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