Fundamental Analysis Of Grindwell Norton: Manufacturing is a critical pillar of the country’s economic growth. Thanks to the success of important industries such as automotive, engineering, chemicals, pharmaceuticals, and consumer durables. However, there is one key piece of machinery that is very essential in the manufacturing & Engineering industry. This is known as Abrasives.

Abrasives are used to grind, polish, and sand materials. The abrasives contain sharp particles that employ friction to shape wood, metal, and other materials. In this article, we will look at the Fundamental Analysis Of Grindwell Norton, an abrasive maker including its future plans, financials and key metrics.

Fundamental Analysis Of Grindwell Norton – Company Overview

Grindwell Norton(GNO) is a leading manufacturer of grinding wheels, abrasives, ceramics & plastics established in 1941.  GNO joined the Saint-Gobain Group in 1990, which is a global leader in sustainable and light building. 

Currently, as per this partnership, Saint-Gobain Group holds 51.66% of the equity capital of Grindwell Norton Ltd. Additionally, GNO is now Saint-Gobain India’s Head Office and captive India IT Development Center for the Saint-Gobain Group globally. 

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As Grindwell Norton is predominantly a manufacturer of grinding wheels, let us learn what grinding wheels are. These wheels are used to remove materials by the use of friction and wear. These wheels are commonly used in multiple industries such as manufacturing, construction, and metalworking.

Other than grinding wheels, Grindwell Norton also is into the manufacturing of Ceramics & Plastics. The performance ceramics & Refractories business is part of Saint Gobain’s Ceramic Materials division. This division offers complete solutions concerning design, engineering, and product manufacturing for refractory systems for high-temperature applications, ballistic applications, and wear applications.

Products with high-performance qualities are created by the Performance Plastics Business. These include properties that make plastics resistant to temperature, friction, chemical, optical, and weather. 

Apart from the manufacturing of products, the Company also provides full-fledged building solutions for houses & commercial spaces. These include offering insect screens to provide insect & mosquito protection for doors, windows, pools & patios. The performance plastic division provides a host of solutions for the automotive and housing market. 

Fundamental Analysis Of Grindwell Norton – Industry Overview

FY23 presented challenges worldwide including, the economy, layoffs, war, and environmental crisis. Just when the world recovered from the Pandemic, the war in Ukraine broke out in February 2022. The prices of commodities, food, energy, and fertilizer rose sharply. 

As inflation rates accelerated, central banks responded with monetary policy tightening to contain inflation. Due to the negative effects of rising import costs, declining currencies, increased living expenses, and a stronger dollar, many developing nations experienced extreme economic hardship.

The global economy grew by 3.4% in CY22 and is expected to grow at 2.8% in CY23, before rising slowly and settling at 3%. The Indian economy has strongly rebounded on the back of a sustained recovery in domestic demand, government’s spending on infrastructure, and export growth. Further the ‘China Plus One’ strategy spurred India as a global supplier by many International players.

The annual rate of inflation is below 6% and as per the World Bank it is expected to average out at 5.2% for the FY24. The export of goods and services in the first nine months of the financial year (April-December) was up by 16% compared to the same period in 2021-22. 

India’s current growth continues to be resilient despite some signs of moderation. The overall growth remains robust and is estimated to be between 6.5% to 7% for the full year. Strong investment activity, supported by the government’s push for capital expenditures, and robust private consumption provided the foundation for growth. 

The Index for Industrial Production(“IIP”) grew by 5.5% over 2021-22 and the growth was widespread. The global geo-political disturbances resulted in rising commodity price and input cost which resulted in rise in inflation and depreciation in Rupee against the USD.

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Fundamental Analysis Of Grindwell Norton – Financials

Revenue & Net Profit

In FY23, Grindwell reported a gross revenue of Rs. 2541 Cr, which increased by 26% from Rs. 2013 Cr. The revenue growth has only picked up in the past two years, which stagnated from FY19-FY21. Due to strong double-digit growth in the past two years, Grindwell has scaled its revenue by 12.3% CAGR since FY19.

Although the Company’s revenue has just picked up in the past two years the Net Profits have stayed rather consistent. Net Profits in FY23 increased by 23% from Rs. 295 Cr in FY22 to Rs. 362 Cr in FY23.

Fiscal YearGross RevenueNet Profit
2023 ₹ 2,541.34 ₹ 361.52
2022 ₹ 2,012.75 ₹ 295.07
2021 ₹ 1,637.91 ₹ 237.74
2020 ₹ 1,579.56 ₹ 183.89
2019 ₹ 1,598.06 ₹ 168.72
4-Year CAGR12.30%20.99%

Profit Margins

Operating Margins of the Company were reported at 21.39% as of FY23. These margins have remained sustainable at around 20%, increasing to their highest OPM of 22.21% in FY21. OPMs have slowly increased as a result of the reduction in Manufacturing costs.

Net Profit Margins of the Company have remained above the 10% range in the past 5 years. Grindwell maintained a Net Profit Margin of 13.9% in FY23, which dropped from Rs. 14.28% in FY22. In the past 5 years. Grinwell has maintained an NPM of 12.8%.

Fiscal YearOperating Profit Margin (%)Net Profit Margin (%)
202321.39%13.92%
202222.00%14.28%
202122.21%14.08%
202018.82%11.35%
201918.81%10.33%
5 Year Average20.65%12.79%

Return Ratios

Due to the rising profits, the return on Equity has improved from 20.17% in FY22 to a 5-year high of 21.47% in FY23. Since FY21, the 5-year average of the Company remains at 18.53%. 

Return on Capital Employed spiked from 21.15% in FY22 to 24.65% in FY23. Due to significantly low debt, the Company has successfully maintained its ROCE at a 5-year average of 23%. 

Fiscal YearROE (%)ROCE (%)
202321.47%24.65%
202220.17%21.15%
202118.68%24.47%
202016.14%21.15%
201916.21%24.65%
5 Year Average18.53%23.21%

Debt Analysis 

The Company has been virtually debt-free with a debt-to-equity ratio of just 0.02x. Debt to Equity has slightly increased from 0.01x in FY22 to 0.02x in FY23 as a result of slight increase in short-term debt.

The interest coverage ratio of Grindwell Norton was at 63.29x in FY23 with a 5-year average of 96.81x, Since, the Company is virtually debt-free, the interest coverage ratio is highly insignificant. 

Fiscal YearDebt / EquityInterest Coverage Ratio
20230.0263.29
20220.0197.09
20210.0093.75
20200.0055.28
20190.00174.63
5 Year Average0.0196.81

Fundamental Analysis Of Grindwell Norton – Future Plans

  1. The Company expects strong demand from the electric vehicle segment to drive demand for Grindwell’s composites business.
  2. The Performance plastics business will strengthen its presence in existing markets while accelerating into new markets in the industrial, life sciences, and construction segments.
  3. In the performance ceramics segment, the Company is undergoing the expansion of its Halol Unit, in Gujarat.

Fundamental Analysis Of Grindwell Norton – Key Metrics

The Key Metrics of Grindwell Norton are given below.

ParticularsAmountParticularsAmount
CMP ₹ 2,092.50 Market Cap (Cr.) ₹ 24,951.00
EPS ₹ 32.69 Stock P/E 63.9
ROE (%)21.47%ROCE (%)28.25%
Promoter Holding (%)58.03%FII Holding (%)8%
Debt to Equity0.02Price to Book Value13.55
Operating Profit Margin21.39%Net Profit Margin13.92%

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Conclusion

In conclusion of the article on Fundamental Analysis Of Grindwell Norton, we have found that Grindwell Norton is a leading manufacturer of grinding wheels, abrasives, ceramics, and plastics. The Company is a subsidiary of the Saint-Gobain Group. The company demonstrated strong financial performance in FY23, with revenue growing by 26% to Rs. 2541 Cr and net profit increasing by 23% to Rs. 362 crore. 

Grindwell Norton has maintained healthy profit margins of around 20% and boasts high return ratios, including a return on equity of 21.47% and a return on capital employed of 24.65% in FY23. Notably, the company is virtually debt-free, with a debt-to-equity ratio of just 0.02x. 

Looking ahead, Grindwell Norton expects robust demand from the electric vehicle segment to drive its composites business. The company is also expanding its presence in existing and new markets for performance plastics and increasing capacity for its performance ceramics segment. 

With its robust financials, diversified product portfolio, and strategic growth initiatives, Grindwell Norton is well-positioned for future growth, particularly in emerging sectors such as electric vehicles and construction.

Written by Nasir Hussain 

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