Carborundum Q2 Review- Incremental Margin Pressure In Electro-Minerals Leads To Guidance Cut: ICICI Securities

ICICI Securities Report

Carborundum Universal Ltd. reported a disappointing set of numbers. Revenues grew 7% YoY to Rs 12.2 billion, Ebitda grew 16% YoY to Rs 2 billion and adjusted profit grew 12% YoY – a subpar performance. Carborundum operates in three segments – ceramics, abrasives and electro-minerals.

Margins for electro-minerals continues to bear the brunt of competition from Chinese producers. Thus, the company has lowered its profit margins (Ebit) guidance by 130 bps on a consolidated basis.

Also, there is weakness in the ceramics business. Loss in the biggest customer in ceramics has led to a muted H1 FY25. The recovery in the customer business has been gradual and is expected to recover in the next few quarters. As a result, we trim our earnings estimates by 16% each in FY25 and FY26. The stock is trading at 40 times FY26E earnings per share. Maintain Reduce with a target price of Rs 1,275.

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