Accumulate Carborundum Universal; target of Rs 1601 Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Carborundum Universal with a target price of Rs 1601 in its research report dated November 05, 2024.

Broker Research

November 05, 2024 / 11:33 IST

accumulate

26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Carborundum Universal

Carborundum Universal (CU) reported 7.6% YoY sales growth and 131bps YoY rise in EBITDA margin to 15.9%. Demand for ceramics remains strong across geographies from sectors such as carbon black, steel, cement, chemicals, and power distribution. CU’s expansion into HPSiC as well as engineered ceramics for semiconductors and defence is on track, with ~Rs3bn capex planned for FY25. Delays and capacity constraints have led management to significantly cut FY25 guidance for AWUKO, while RHODIUS performance is largely in line with plans. Meanwhile, rising alumina costs and strong pricing pressure from Chinese dumping is impacting the Electrominerals business. We believe CU will perform well in the long run given 1) healthy domestic demand, 2) capacity expansion in Electrominerals and Abrasives 3) valueadded product launches in Engineered ceramics, 4) strong market reach and exports, and 5) improvement in RHODIUS & AWUKO. However, pricing pressure from Chinese competition will be a key monitorable. The stock is trading at a P/E of 52.3x/40.1x/33.4x on FY25/26/27E earnings. We roll forward to Sep’26 and value Abrasives/Ceramics/Electrominerals at 37x/50x/26x Sep’26E EPS (40x/55x/30x FY26E earlier). Upgrade to ‘Accumulate’

Outlook

We revise our FY25/26E EPS estimates by -9.5%/-4.0% factoring in weaker profitability in AWUKO and Foskor Zirconia, but upgrade the rating to ‘Accumulate’ from ‘Hold’ with a revised SoTP-based TP of Rs1,601 (Rs1,650 earlier) given the recent correction in stock price.

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