Buy Carborundum Universal Ltd; target of Rs 1,315: Sharekhan

Sharekhan is bullish on, We expect growth momentum to sustain, driven by sustainable demand across segments in the long term.

Broker Research

November 20, 2023 / 11:14 IST

Buy

26 Aug, 2025 12:21

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Sharekhan's research report on Carborundum Universal Ltd

Q2 consolidated results lagged estimates particularly on sales fronts mainly due to weak sales in Ceramics and Electrominerals segment. Total revenues grew by 2% y-o-y to Rs 1,146 crore. Operating profit grew by 3% y-o-y to Rs. 168 crore as power and fuel cost declined. Consequently, OPM improved by 16 bps y-o-y to 14.6% (versus our estimates of 14.5%). PAT grew by 14.5% y-o-y to Rs 102 crore and was below our estimate mainly due to lower-than-expected revenue growth. Among segments, abrasives & ceramics registered y-o-y sales growth of 6% & 4% respectively, while electrominerals segment registered a y-o-y decline of 8% as dumping by Chinese producers led to decline in product prices price of product in this segment. EBIT margin in electrominerals segment declined by 59bps y-o-y to 16.3% but improved considerably on a q-o-q basis, while ceramics and abrasives margin improved by 245bps and 149bps y-o-y to 27.8% and 7.3%, respectively.

Outlook

We expect growth momentum to sustain, driven by sustainable demand across segments in the long term. CUMI stands to benefit from multiple factors such as an uptick in capex in its end-user industries, China +1 strategy, strong government initiatives to support domestic manufacturing, and increasing demand prospects for specialty products driven by clean energy initiatives. Moreover, all segments are witnessing healthy profitability. The stock trades at 29xFY26E EPS and the rich valuations are justified given strong earnings growth outlook and a healthy balance sheet and improving return ratios. Therefore, we retain Buy on CUMI with an unchanged price target (PT) of Rs. 1,315.

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