Accumulate Carborundum Universal; target of Rs 1114: Prabhudas Lilladher

Prabhudas Lilladher's research report on Carborundum Universal

We revise our FY26/27E EPS estimates by -28.0%/-25.3% factoring in weaker subsidiary performance and VAW’s loss of export business. Carborundum Universal (CU) reported 9.8% YoY consolidated sales growth while its EBITDA margin declined by 262bps YoY to 14.1%. In the Abrasives segment, the standalone business performed decently, although subsidiary operations remained weak. Standalone ceramics benefited from steady demand for engineered ceramics however, consolidated margins were affected by a onetime cost increase from subsidiaries in the America and Australia. In Electrominerals, despite healthy volumes, rising alumina prices and pricing pressures from Chinese dumping continued to pose challenges. The ongoing underperformance of subsidiaries, coupled with VAW’s inclusion in the SDN list—resulting in the loss of its export business—further exacerbated concerns. Amid these headwinds, management has revised its FY25 revenue growth and margin guidance downward for all the segments, intensifying uncertainty around future performance.

Outlook

The stock is trading at a P/E of 40.0x/32.1x on FY26/27E earnings. We maintain ‘Accumulate’ rating with a revised SoTP-derived TP of Rs1,114 (Rs1,583 earlier), valuing Abrasives/Ceramics/Electrominerals at 35x/43x/20x Sep’26E (37x/50x/26x Sep’26E earlier) due to continued challenges in the export markets.

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