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Grasim Industries Ltd. Q2FY24 standalone revenues came at INR64,420 mn, up 3.3% QoQ but down 4.5% YoY. Raw Material cost during Q2 stood at INR33,971 mn vs INR30,977 mn for Q1FY24, up 8.9% YoY. The higher Rm Cost for the quarter had impacted the margins for the quarter. Q2FY24 EBITDA came at INR5,937 mn vs INR6,735 mn for Q1FY24, down 37.9% YoY. The EBITDA for the quarter is net of pre-operative expenses of the new businesses. PAT for Q2FY24 came at INR7,950 mn, up 123.8% QoQ but down 17.6% YoY. EPS for the quarter came at INR12.1.   Viscose business: In Q2FY24, the company's VSF sales volume saw a robust 23.7% YoY increase to 210KT. The uptick in domestic demand, fueled by the festive season. China's operating rates nudged to 85% in Q2FY24. Domestic prices remained under pressure. Although segment revenue rose 8.5% QoQ to INR 38,889 mn. The viscose business EBITDA surged 20.1% QoQ and an impressive 44.5% YoY, lead by heightened sales volume and lower input prices. Nevertheless, VFY business margins were pressured by China's assertive pricing strategy, prompting necessary domestic price adjustments.   Chemicals business: Caustic soda sales volume increased to 306 KT from 292 KT in Q1FY24, marking a 3% YoY growth. International Caustic Soda spot prices (CFR SEA) remained relatively stable at approximately $417/ton in Q2FY24. However, prices experienced a dip to $383/ton in July 2023, recovering later in the quarter and reaching $470/ton in September 2023. The chemical business revenue totaled INR 19,884 mn. This reduction in revenue was primarily attributed to lower caustic soda realizations. The EBITDA for the quarter was INR 2,363 mn. Notably, the specialty chemicals segment, encompassing epoxy polymers and curing agents, faced margin challenges due to lower realizations compared to Q1FY24.   Paints business expansion plan on track: The paints business is set to kick off its commercial operations in Q4FY24, with the brand name "Birla Opus" being officially announced by the company. Consent to operate plants has been secured for three key locations: Panipat, Ludhiana, and Cheyyar. In the same quarter, the company introduced a painting service named "Paint Craft" in eight major Indian cities. It's noteworthy that a significant portion of the capex will be allocated to the Paint Business.    Capex Plan: In Q2FY24, the total capex outlay amounted to INR 16,500 mn. The Board approved a capex of INR 1,440 mn for various businesses and endorsed the rephasing of spending for previously approved capex, involving an additional expenditure of INR 1,380 mn in the current financial year. Consequently, the revised budgeted spend for FY24 now stands at INR 59,290 mn.   Outlook and Valuation: Grasim Industries is making strides in paints and e-commerce. Birla Pivot, a B2B e-commerce platform for construction materials, has been launched, covering markets in Maharashtra, Madhya Pradesh, and Delhi. Over 120 brands are on board. The paints business is set to start in Q4FY24 with the brand name "Birla Opus." These initiatives showcase Grasim's commitment to expansion and innovation in diverse sectors to drive further growth. We have introduced FY26E and are expecting Revenue/EBITDA to grow at a CAGR of 7.6%/10.4% respectively over FY23-FY26E. We value the company on a SOTP basis to arrive at a TP of INR 2,100, upgrading our rating to ADD.

NH, in Q2FY24, posted performance were below our expectations only on the revenue front. The company reported revenue growth of 14.3% YoY, amounting to Rs. 13.05bn (compared to ICSG's est. of Rs. 13.38bn). The company recorded the highest-ever revenue on a quarterly basis which was led by significant contribution from HCCI (achieving highest revenue and profitability) and continued healthy traction from the new radiation oncology block. Revenue from Cayman Island surged by 8.3% YoY to USD 31.5mn. The India business operation witnessed a 14.7% YoY increase, reaching Rs. 10.52bn, primarily driven by the strong performance from new facilities including SRCC, Gurugram and Dharamshila.  Outlook and Valuation: We expect NH to deliver healthy growth over FY23-25 driven by 1) geographically diversified presence across India (strong presence in Karnataka and East India (Kolkata)), 2) Diversification of its specialties from cardiac care and renal sciences to oncology, neurosciences, orthopedics and gastroenterology, 3) Strong presence in Health City Cayman Islands in North America (also adding new multispecialty center and a continued traction in radiation oncology department) and 4) prudent capital allocation of new capex in high ARPOB facilities like Kolkata & Bangalore. We value the stock (19x EV for FY25E EBIDTA), to arrive at a TP of Rs.1,259 with ADD rating. New Hospitals firing growth engine for India business: During the quarter, facilities including SRCC, Gurugram, and Dharamshila contributed the combined revenue of Rs. 1.19bn compared to Rs.1.15bn in Q1FY24. The EBITDA from the facilities also improved significantly from Rs. 60mn in Q1FY24 to Rs. 87mn in the current quarter. Dharamshila is already hitting EBITDA margin of 15- 17%, which the company expects other facilities will follow.  Brownfield expansion keeps long-term growth intact: The company has plans of Rs. 2.5bn of brownfield expansion which will be for the flagship facilities, including Bangalore and Kolkata. In Bangalore, the construction work has already started, and it plans to add 700+ beds in the next 3- 4 years. The Kolkata’s land is a part of green field expansion. The company has added 2 floor in the Howrah facility, Kolkata which will have +110 beds by the end of FY24. It is also looking at other projects in brownfield and greenfield at the flagships hospital. The management understands that even without any further investment, it would be able to grow at a high single digit. New Facility in Cayman Island: It is on track and is expected to be commissioned in Q1FY25 and make meaningful contribution. There will be decent chunk of fixed cost which will come with the commissioning of the hospital. It expects the ramp up to be significantly fast and may see some margin dilution.

Net revenue came at Rs.872mn (+54.9% YoY/+51.1% QoQ) led by execution of various program under the localization initiative mostly related to missiles. Gross profit increased by 62.3% YoY, led by controlled raw material prices and EBITDA grew by 85.5% YoY to Rs.186mn with a margin of 21.3% (+349bps YoY/+101bps QoQ) led by execution of high margins program such as TAL, VARUNASTRA, EHWT. Higher RM cost was partially offset by Oplev and other cost control measure. PAT grew by 300.6% YoY to Rs.66mn due to flat depreciation and low tax rate during the quarter. Despite global uncertainty and supply chain instability AMS has delivered decent set of performance during Q2, we expect company will manage to achieve the growth guidance in FY24. Missiles dedicated product portfolio: AMS has participated in 55-60 programs, catering to Missiles, Naval Torpedoes and Underwater Mines. With strong order execution visibility and capacity expansion, management expects to increase revenue to grow by 35-40% over FY24-25. The company's product portfolio serves the Line Replaceable Units (LRUs) of defense systems in the fields of Missiles, Torpedoes, Submarines, Bombs, Artillery Systems, ATGMs, and Radar. Some of the programs include AGNI, PINAKA, AKASH-NG, VLSRSAM, VARUNASTRA, TAL, NIRBHAY, ATAGS, MIGM, and more. AMS has actively participated in most of the Indigenous missile programs. One such program is MIGM (Underwater Mine), which is an import-banned product, and the Ministry of Defense's requirement must be fulfilled through local vendors. AMS is involved in all indigenous programs.  5X+ capacity expansion to carter future demand: The company is looking to increase its facility size from the current 55,000 square feet to 3.3 lakh square feet over the next 12 months, with a capex of Rs.150 crore. This investment will be allocated to machinery and testing equipment. The management intends to fund this capex with a 70:30 ratio of debt to equity. Unit-2, spanning 50,000 square feet, is set to be commissioned by DecemberJanuary. Unit-3, which spans 240,000 square feet, will be commissioned in H1FY25. The management anticipates that 3-4 programs, for which they have received product development approval, will undergo trials in the upcoming season, with the torpedo program having AMS supplying the seeker and accounting for roughly 50% of the total content value. View and valuation: We are confident about the growth story of the Apollo Micro Systems, due to its position (involvement in various strategic missiles from MoD and BDL) and faces very less competition. We have a positive outlook on AMSL, supported by, Sole supplier of underwater mines, Favourable Government policies on self reliance on defence sector, Rising defence spending across all segment (Naval, Army, Air Force), Massive upcoming big ticket projects, The company’s healthy order pipeline, would support the the growth story of the company. We expect AMS Revenue /EBIDTA/PAT to grow at 41/44/74% over FY23-26. We value the stock based on 50x of FY26E EPS (with PEG ratio 0.7x during same period) to arrive at the TP of 163 with “OUTPERFORM” rating.