Hold Carborundum Universal; target of Rs 1028 Prabhudas Lilladher

Prabhudas Lilladher's research report on Carborundum Universal

We revise our FY26/27E EPS estimates by -21.0%/-22.7% factoring in VAW’s loss of export business, Chinese dumping and expected impact of Rs1.0bn on FY26 PAT; and change our rating from ‘Accumulate’ to ‘Hold’. Carborundum Universal (CU) reported a 1.3% YoY increase in consolidated sales, while EBITDA margin declined by 542 bps YoY to 12.0%, impacted by weaker profitability in subsidiaries and a sharp 30% volume drop in VAW under the Electrominerals segment. The Abrasives segment continued to benefit from industrial and retail demand and better contribution from subsidiaries. Standalone Ceramics benefited from steady demand for engineered ceramics however, consolidated margins were affected by lower profitability in subsidiaries. Management aims to double its revenue in the next 5-6 years with their long-term strategy focusing on scaling the core business. However, amid the short-term challenges, management has guided a modest 6-7% sales growth in FY26 with a 100-150bps margin decline.

Outlook

The stock is trading at a P/E of 49.7x/40.7x on FY26/27E earnings. We roll forward to Mar’FY27E and value Abrasives/Ceramics/Electrominerals at 32x/40x/20x Mar’27E (35x/43x/20x Sep’26E earlier) with a revised TP of Rs1,028 (Rs1,052 earlier).