Shares of Grasim Industries soared as much as 5% in trade on June 10 after global brokerage Morgan Stanley upgraded it to an ‘overweight’ call, stating that the stock had multiple opportunities playing out that could lift its share price in the medium-term.
Morgan Stanley revealed being positively surprised by Grasim’s paints business—Birla Opus. “Paints business has fared better than expected since launch with strong market share gains over the past couple of quarters. Next leg of paints value unlocking in play. Though this may fall short of the guided revenue target of ₹100-bn by FY28, Grasim is on track to become a formidable number 3 player by FY28, in our view,” Morgan Stanley wrote.
Aside from the paints business, Morgan Stanley’s bullishness also runs high for Grasim’s major growth driver—Ultratech Cement. As per Morgan Stanley, Ultratech remains the largest value driver for Grasim, and the company should benefit from a multi-year earnings compounding story at the cement company.over 2%
“Potential for gains in market share coupled with cost optimization levers mean Ultratech has a strong multi-year earnings compounding story, we believe. This should drive strong stock performance over the medium term, and be a key driver of stock returns,” the brokerage wrote.
Buoyed by the upbeat views for Ultratech, shares of the cement company also rose over 2% in trade.
Lastly, Morgan Stanley also holds an optimistic lens when looking at Grasim’s new-age businesses, highlighting their fast scale-up, which is expected to drive earnings growth and value optionality.
Factoring in these growth levers, Morgan Stanley sees a strong case for the above opportunities to play out for Grasim over the next few years, making a case for both a re-rating and compounding potential. To that effect, the brokerage also lifted its price target for the stock by nearly 18% to ₹3,500, leaving the scope of a 36% upside from current levels. Not just that, banked on the multiple growth drivers for Grasim, Morgan Stanley also touted the stock as a ‘top pick’ within its coverage.
