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Grasim Industries – Review

January 5, 2009

Grasim Industries cut VSF prices by 7-8%; The Co’s recent price cut follows a 3-4% price cut in Nov-08. For FY10E, we expect a further 5% drop in VSF prices. Risk to FY10E remains on the downside due to sluggish textile demand & VSF’s expensive pricing vs polyester (PSF) & cotton. In the short-term (for 4Q), however, earnings will be cushioned by drastic drop in sulphur prices (down ~90% from peak.

Cement volume forecasts are expected to go down by by 6% for FY09E and 10% for FY10E reflect slower than anticipated cement demand and consequent slow utilization of Grasim’s Shambhupura expansion. The weak demand environment may further delay commissioning / supplies from Grasim’s Kotputli expansion into 2Q FY10E.

Weak 3Q FY09 (Oct-Dec) results to be followed by strong QoQ earnings recovery in 4Q FY09 (Jan-Mar). Full-benefit of lower input costs & staggered pass-through of recent 4% excise cut on cement should help 4Q profits.

For FY09, Grasim is expcted to report an EPS between Rs 240 to Rs 250.

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