Morgan Stanley has named Grasim Industries Ltd. its top pick in the cement building materials space and raised its target price, stating that the company is well-placed to ride multiple growth levers in the medium term.
The brokerage said Grasim’s paints business has exceeded expectations since launch, new-age businesses are scaling up fast, and Ultratech Cement Ltd.—India’s largest cement producer and a key subsidiary—is poised for multi-year earnings compounding. Grasim is also the flagship company of the Aditya Birla Group.
Morgan Stanley has raised its target price on Grasim to Rs 3,500 from Rs 2,975 earlier, implying a 36% upside. It has also upgraded the stock from equal weight to overweight, indicating that Grasim’s total return is expected to outpace the average returns of its industry peers over the next 12-18 months.
The brokerage noted that Grasim’s paints business has surprised on the upside with strong market share gains, setting the stage for the next phase of value unlocking. Although it may not reach the Rs 100 billion revenue target by financial year 2028, Grasim is on track to become the third-largest paints player by then. Morgan Stanley has lifted its paints business — Birla Opus’ valuation — to Rs 360 per share from Rs 150 earlier.
Ultratech Cement remains Grasim’s largest value driver, with potential market share gains and cost efficiencies expected to power a multi-year earnings compounding story. Meanwhile, Grasim’s new-age businesses, such as business-to-business e-commerce and renewables, are scaling up rapidly, adding both earnings growth and valuation potential.
The brokerage also highlighted that holdco discounts, which have narrowed sharply over the past couple of years, could see further moderation as the paints business scales up, unlocking additional upside for Grasim’s stock.
Morgan Stanley analysts warned that key downside risks include weaker-than-expected performance in the paints business, prolonged softness in cellulose and chemicals, and competition in the cement sector that could affect Ultratech’s performance. It also flagged capital allocation to subsidiaries as a potential risk.
Despite these headwinds, Morgan Stanley said the combination of these growth levers makes a compelling case for both re-rating and earnings compounding in Grasim.
The cement company’s shares rose as much as 5.12% to Rs 2,742 apiece during the day. Its shares were trading 4.13% higher at Rs 2,716.8 compared to a 0.18% advance in the benchmark Nifty 50 as of 10:44 a.m.
Seven out of the nine analysts tracking Grasim Industries have a ‘buy’ rating on the stock, one recommends a ‘hold’ and one suggests a ‘sell’, according to Bloomberg data. The 12-month analysts’ consensus target price on the stock is Rs 3,146.22, implying an upside of 15.1% from the current market price.
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