Grauer and Weil: Strong pick-up in business to support earnings growth

The revival of the economy, particularly industrial growth, has augured well for Grauer and Weil, which has delivered strong earnings growth in the recent quarters. Moreover, the company is expected to do well as a result of higher capacity utilisation, capacity expansion and improving profitability in the real-estate business, which, earlier, had suffered because of lockdown restrictions.

Strong financial performance

Part of this revival in business is already reflecting in its financial performance. During the first quarter of the current fiscal, the company delivered a strong 113 per cent growth in revenues.

Its largest segment, surface finishing materials, reported a good 90 per cent year-on-year (YoY) growth, led by a strong demand and low base effect of the last year. Engineering, too, saw good execution, compared to last year, leading to a strong jump in revenue. Its shopping mall business, which comes under the shoppertainment segment, also saw good traction, adding to overall growth.

Moreover, higher scale and good control over cost helped the company to deliver higher margins and operating profits. During the quarter, the company made an EBITDA of close to Rs 29 crore against Rs 4 crore in the corresponding period last year.

Earnings outlook

Last year, the contribution of engineering and shopping mall business to overall profitability was very low. This year, it is expected to improve, considering the pickup in revenue and higher scale. Surface finishing continues to benefit from higher demand from user industries. The recovery in demand is, in fact, now expected to be higher, with the easing of COVID-related restrictions. We are expecting a strong 18-20 per cent earnings growth over the next two years.

ValuationThe stock was around Rs 54 apiece in mid-August 2021. It is now trading at Rs 67 a share, which is 13 times its fiscal 2023 estimated earnings. Valuations are reasonable, considering the strong earnings growth and cash in books.


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