Morgan Stanley Grasim: Morgan Stanley upgrades Grasim to ‘Overweight’, raises target price to Rs 3,500

Mumbai: Morgan Stanley has raised Grasim Industries to ‘Overweight’ and added the stock to its list of top picks. The brokerage increased its price target to ₹3,500 from ₹2,975, implying a 29% upside from the stock’s last closing price of ₹2,708.50. The brokerage expects holding company discounts to continue moderating as the paints business scales, improving visibility on the standalone business.

“We believe there is a strong case for both a re-rating and compounding potential over the next few years,” Morgan Stanley said.

The brokerage said the next leg of value unlocking for the paints business is underway.

“Grasim surprised positively during the first leg of execution, with strong market share gains,” said the brokerage. “Though this may fall short of the guided revenue target of ₹100 billion (₹10,000 crore) by FY28, Grasim is on track to become a formidable (number) 3 player by FY28 in our view.”
The brokerage has raised its valuation for the paints business to ₹360 per share from ₹150 earlier. It now expects Grasim’s paints revenue to reach ₹77 billion (₹7,700 crore) by FY28 and sees the company gaining around 10% market share in the organised decorative segment. Grasim’s stake in Ultratech Cement remains a key driver of value. “Ultratech has a strong multi-year earnings compounding story,” Morgan Stanley said. “Profitability metrics should continue to improve, and a non-cyclical earnings trajectory should help the stock fetch premium valuations.”