Grasim Industries is in the process of augmenting its cement capacity by 4.5MMT at Kotputli in Rajasthan by Q3FY2009.
The company has also commissioned a 23MW CPP at Jawad in Madhya Pradesh and will augment the CPP capacity by 144MW during FY2009. Besides this, the company is also augmenting its VSF capacity at Harihar in Karnataka by 31,000 tonne by Q3FY2010.
The volume growth due to capacity additions in cement and VSF divisions and saving through CPP will drive the earnings of the company.
At the market price of Rs2,263, the stock is trading at 9.1x its estimated FY2009 EPS. Based on our sum-of-the parts valuation, we maintain Buy recommendation on the stock.