PL First Cut – Grindwell Norton (GWN) Q2FY24

PL First Cut – Grindwell Norton (GWN) Q2FY24 – Amit Anwani – Research Analyst, Prabhudas Lilladher Pvt Ltd

Grindwell Norton (GWN) Q2FY24 Results First Cut – Miss on Revenue and EBITDA while gross margin expands

(CMP: Rs2,155 | MCap: Rs238.6bn)

Q2 Result Summary

▪️ Consolidated revenue grew 5.2% YoY to Rs6.7bn (PL estimate of Rs7.1bn and consensus estimate of Rs7.6bn), driven by growth in the Digital Services segment.

▪️ Segment wise: Abrasives revenue came in at Rs3.4bn (up 6.4% YoY), while Ceramics & Plastics revenue was almost flat at Rs2.8bn (up 0.9% YoY). Digital Services revenue grew 26.7% YoY to Rs463mn.

▪️ EBITDA grew 7.3% YoY to Rs1.3bn (PL and consensus estimate of Rs1.5bn), with EBITDA margin increasing slightly by 40bps YoY to 19.7%, as gross margin expansion of 175bps YoY to 55.2% was offset by higher other expenses (up 99bps YoY as a % of sales) and higher employee costs (up 36bps YoY as a % of sales).

▪️ Segment wise EBIT margin: Abrasives margin increased to 14.3% (vs 12.8% in Q2FY23), Ceramics margin fell to 20.0% (vs 21.7% in Q2FY23), and Digital Services margin rose sharply to 35.7% (vs 17.6% in Q2FY23).

▪️ PAT grew 13.1% YoY to Rs1.0bn (PL and consensus estimate of Rs1.1bn), aided by higher other income (up 50.8% YoY to Rs226mn).

▪️ The stock is currently trading at a PE of 55.5x/46.5x/38.6x FY24/25/26E. We have a Buy rating on the stock with a TP of Rs2,604.