Carborundum Universal: Prabhudas Lilladher Maintains Target Price of Rs 986

Carborundum Universal Reports Mixed Q4FY26 Performance

Carborundum Universal (CUMI) has reported a mixed Q4FY26 performance, driven by broad-based growth across its key segments. The company's consolidated revenue grew by 15.4% year-on-year (YoY) during the quarter, with the Abrasives segment witnessing a growth of 13.4% YoY, followed by a growth of 18.6% YoY in the Ceramics segment and 14.0% YoY in the Electrominerals segment.

However, the company's EBITDA margins contracted by 171 basis points due to weakness in Rhodius abrasives, Awuko abrasives, and Foskor Zirconia. Despite this, the Abrasives segment witnessed a healthy recovery supported by dealer additions, new product launches, GST-led demand normalization, and improving retail and industrial demand. The segment also saw an improvement in export competitiveness following a reduction in Chinese export incentives. The Ceramics segment continued to benefit from traction in engineered ceramics, SOFC-linked applications, and metallized cylinders, while the Electro Minerals segment growth was led by exports of treated grain products aided by anti-dumping duties on Chinese imports in Europe.

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Restructuring Efforts

However, consolidated profitability remained impacted by continued losses in overseas subsidiaries, including Awuko, Foskor Zirconia, and VAW Russia. In response, the company has initiated restructuring and closure measures in Awuko and Foskor Zirconia. Despite this, management expects the underlying growth momentum to remain stable across core businesses, supported by investments in advanced ceramics, semiconductor-related applications, and export opportunities.

Outlook

The stock is currently trading at a price-to-earnings (P/E) ratio of 51.0x/41.2x on FY27/28E earnings. The company's earnings per share (EPS) estimates have been revised by 0.5%/5.7% for FY27/28, adjusting for the wind-up of loss-making subsidiaries Awuko and Foskor Zirconia, along with improving broad-based recovery across core businesses. The rating has been downgraded from 'Hold' to 'Reduce' given the recent rally in the stock price, with a so-called total permanent (SoTP) based revised target price (TP) of Rs986 (Rs825 earlier) valuing Abrasives/Ceramics/Electrominerals at 33x/40x/15x Mar'28E (30x/34x/15x Sep'27E).

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