Multiple growth engines at play; structurally positive
VSF revival positive in the near term; Paint bolsters long-term growth
We believe GRASIM has a compelling structural long-term investment case underpinned by an improving VSF earnings cycle, a stable margin in the chemicals business due to the company’s focus on specialty chemicals, and a long-term growth opportunity in decorative paints. The VSF business is entering a margin recovery phase in 2HFY26, supported by a modest rebound in China pricing, stable pulp costs, and consistently high utilization levels (>90%). These should drive an expansion in EBITDA/kg and margins over FY27–28E. In chemicals, GRASIM’s leadership in chlor-alkali and epoxy resins, coupled with ongoing investments to raise chlorine integration to ~70%, underpins steady revenue and EBITDA growth despite a correction in caustic soda price due to overcapacity. The paints business (Birla Opus), while currently in an investment-led phase, provides a scalable growth optionality in a large and under-penetrated market, with rapid distribution expansion and brand investments positioning the business for medium-term operating leverage once scale is achieved. We reiterate our BUY rating with a TP of INR3,600 based on an SoTP valuation.
