Result Update: Carborundum Universal Ltd - BUY - TP Rs.420 - Kotak

CUMI Q4FY18 result is in line with our estimate. Volumes across divisions continue to grow. Industrial ceramics and EMD division have been witnessing rising demand across geographies. Company's Russian subsidiaries VAW reported significant growth in the quarter.

Key Highlights

- CUMI consolidated revenue reported at Rs 6.4 Bn in Q4FY18 (+16% y/y) driven by EMD (Electrominerals Division) and Ceramics divisions.

- We are encouraged by the EBITDA margin trend, being reported at 17.8% in the quarter (against 17.6%) in Q4FY17 (standalone EBITDA margin at 18.2%), especially when the company is trying to cope up with severe volatility in key input prices.

- Company's Russian subsidiary VAW has reported meaningful pick-up in sales. VAW reported sales at Rs 5.6 Bn in FY18 vis-à-vis Rs 4.5 Bn in FY17 driven by higher volumes in abrasives and silicon carbide.

Valuation & Outlook

- Our investment thesis is predicated on expected turnaround/pickup across all the divisions led by global recovery for company's products.

- In view of upside to our unchanged target price of Rs 420, we maintain 'BUY' (ascribe PER 22x FY20 estimated earnings) rating on CUMI stock.

Shares of CARBORUNDUM UNIVERSAL LTD. was last trading in BSE at Rs.372.25 as compared to the previous close of Rs. 368.5. The total number of shares traded during the day was 9215 in over 344 trades.

The stock hit an intraday high of Rs. 377 and intraday low of 367.35. The net turnover during the day was Rs. 3438548.

Source : Equity Bulls

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