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

CUMI Q1FY19 result is in line with our estimate but higher than consensus estimate. Encouraged by the volume growth across divisions (highlight that industrial ceramics and EMD division continues to report traction across geographies), we maintain our positive view on the company.

Key Highlights

- CUMI consolidated revenue reported at Rs 6.3 Bn in Q1FY19 (+22.1% y/y) are driven by all the three divisions- abrasives, EMD (Electrominerals Division) and ceramics divisions.

- EBITDA margin, expanded to 16.9% in the quarter vis-à-vis 13.9% in Q1FY18 (standalone EBITDA margin at 16.5% in Q1FY19).

- Management sounded confident of delivering two years sales guidance of Rs 32 Bn in FY20.

Valuation & Outlook

- Our investment thesis is predicated on continued volume pickup across geographies; margin improvement led by 1/ operating leverage and 2/ increased prices (mainly in value engineered products). We also believe that the company will be able to push compelling price increase (in the range of 7% to 10%) in 9MFY19/FY20.

- We take notable comfort in the demand outlook for company's products and potential capacity ramp up across divisions. 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.348.35 as compared to the previous close of Rs. 350.75. The total number of shares traded during the day was 5130 in over 215 trades.

The stock hit an intraday high of Rs. 356 and intraday low of 345.25. The net turnover during the day was Rs. 1799827.

Source : Equity Bulls

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