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Anand Rathi
Carborundum Universal (Buy)
Target: ₹321
CMP: ₹256.25
Carborundum Universal’s (CUMI) overall operations have picked up pace. Recovery is evident in its ceramics and electro-minerals divisions, in both domestic and international. Subdued demand from end users slowed recovery in abrasives.
The management talked of 80-90 per cent of last year’s utilisation by end-H1 FY20 across the businesses. Supply disruption of minerals from China is likely to benefit EMD business of CUMI. With greater utilisation, focus on operating efficiency, new product launches and quitting the loss-making Foskor, the management is confident of steady margins ahead.
Sluggishness in the auto sector kept recovery in abrasives slow.
The management reiterated its positive stance on ceramics and electro-minerals, and only a gradual recovery in abrasives. We expect consolidated EBITDA margin to step up from 15.3 per cent in FY20 to 16.5 per cent in FY23 and drive earnings growth.
CUMI remains our top pick, with a revised TP of ₹321 (20x FY23).
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