Grasim Industries received a BUY recommendation from ICICI Securities, albeit with a moderated target price of Rs 3,303 from Rs 3,480, reflecting conservative adjustments in the valuations of key holdings like UltraTech Cement. The Q2FY26 results revealed a mixed bag with stable core segment performance offset by challenges in newer business verticals, including decorative paints and B2B e-commerce. Despite marginal dips in some revenues, strong operational execution and promising growth in emerging segments uphold the firm’s revenue guidance of Rs 100 billion for paints and Rs 85 billion for e-commerce by FY27.

ICICI Securities Maintains BUY Rating with Revised Target Price

ICICI Securities has continued its BUY stance on Grasim Industries, adjusting the 12-month target price downward slightly to Rs 3,303 from Rs 3,480. This recalibration stems primarily from a conservative reassessment of UltraTech Cement’s fair value, a principal subsidiary, partially balanced by an upward revision in Aditya Birla Capital's valuation. The research house underscores the company’s resilient EBITDA performance surpassing their forecasts and maintains confidence in meeting revenue milestones for new business verticals despite market headwinds.

Financial Performance: Q2FY26 Earnings Beat Expectations

The standalone Q2FY26 performance delivered an EBITDA of Rs 3.66 billion compared to the estimate of Rs 3.26 billion, translating to a 12.6% YoY growth. Revenues increased 26.1% YoY to Rs 96.1 billion, aided by a balanced contribution from core segments and new ventures. Net profit showed a modest 2% YoY uptick to Rs 8.05 billion. However, segmental profitability was uneven, reflecting pressures in cellulosic fibres and paints offset by strong chemical segment growth. EBITDA margins settled around 3.8%, marginally below expectations, highlighting ongoing cost pressures.

Core Segments: Cellulosic Fibres and Chemicals Outlook

The Cellulosic Fibre segment experienced a 29% YoY EBITDA decline to Rs 3.5 billion, weighed down by logistics disruptions and input cost inflation despite improved blended realizations and a gradual recovery in specialty fibre export volumes. CFY volumes showed a slight rise but pricing pressure persists due to competition from low-cost imports. Conversely, the chemicals segment excelled with a 34% YoY surge in EBITDA to Rs 3.65 billion, driven by increased volumes and improved realization across caustic soda and specialty chemicals. This segment’s expansion adds significant stability and margin enhancement to Grasim’s portfolio.

Emerging Segments: Paints and B2B E-Commerce — Growth Engine in Progress

Revenues from new business verticals rose 8% QoQ to Rs 26.46 billion, with the B2B e-commerce segment buoyed by 15% QoQ growth, reinforcing its path to surpass the Rs 85 billion revenue target for FY27. Although Birla Opus paints recorded marginal revenue declines QoQ under challenging industry conditions, market share gains and robust dealer expansion to over 10,000 towns underpin optimism. The company remains steadfast about achieving profitability for the paints segment by FY28, with innovative initiatives like the ‘Paint Craft’ franchise expanding rapidly across 170 towns.

Segmental EBITDA and Margin Insights

Financial Services and Renewables Supporting Diversification

Aditya Birla Capital reported a steady 3% YoY revenue growth to Rs 105.7 billion with a 10% rise in assets under management to Rs 5.5 trillion. Meanwhile, Aditya Birla Renewables nearly doubled its YoY revenue to Rs 2.6 billion fueled by new capacity additions, reaffirming Grasim’s strategic pivot towards sustainability and non-cyclically sensitive sectors.

Balance Sheet and Valuation Metrics

Grasim’s net debt decreased to Rs 68.6 billion in Q2FY26 (down from Rs 71.5 billion previously), bringing net debt to EBITDA leverage to 2.19x, indicating manageable credit risk. The company shows an EV/EBITDA multiple expected to compress from 44.8x in FY25 to 18.7x by FY27, reflecting anticipated earnings recovery and margin expansion. Return on capital employed (RoCE) and equity (RoE) remain subdued but are forecasted to improve over the medium term.

Strategic Risks to Monitor

Investors should weigh key downside risks, including significant price declines in core commodities such as cellulosic fibres and chemicals, which could materially impact earnings. Additionally, any delays or underperformance in scaling new business segments, primarily paints and B2B e-commerce, could pressure Grasim’s revised target price. Volatility in the valuation of marquee holdings like UltraTech Cement and Aditya Birla Capital also pose valuation uncertainty.

Price Levels and Investment Targets

With the stock currently trading around Rs 2,882, ICICI Securities’ revised target of Rs 3,303 reflects upside potential of approximately 15% over a 12-month horizon. Tactical investors may consider accumulation on dips, particularly on short-term pauses fueled by transient operational challenges, targeting a price zone between Rs 2,800 and Rs 3,300. Maintaining a long-term perspective oriented toward Grasim’s sustained transformation and diversification remains prudent.

Bottomline: Strategic Patience Recommended Amid Transformational Growth

Grasim Industries stands resilient amid sector headwinds, bolstered by solid core business performance and promising traction in emerging segments. The stock’s moderate valuation and stable balance sheet fundamentals make it an attractive candidate for long-term investors seeking exposure to India’s industrial conglomerate space with a diversified revenue base. While near-term volatility stemming from new business scale-up persists, the BUY call by ICICI Securities reiterates confidence in the company’s roadmap toward robust earnings and cash flow growth by FY27-28.