Carborundum Universal: Quarterly Result update
12-11-2021

Carborundum Universal | Rs. 17147 Cr

CMP 905 | P/E 38x FY23

 

Results: Carborundum Universal reported ~22% growth in sales year on year and ~12% growth in operating profit.

Click here for 10 Year X-ray

 

Key highlights: 

  • Abrasives segment grew by 25%, Ceramic by 24% and Electrominerals by 17% year on year. Current utilisations stand at 65% for abrasives, 80% for ceramics and 95% at Electrominerals.
  • Abrasives sales growth was led by a sharp uptick across the standalone business, Sterling Abrasives and Russian subsidiary. The operating profit of the segment surged 21% year on year however the operating margins dipped owing to raw material inflation.
  • Ceramics revenues growth was led by technical ceramics and metz cylinders. However, logistics challenges on exports caused operating margin to contract.
  • Electrominerals sales growth was aided by a cut in production in China on power woes. Operating margin was flat and operating profit grew 18% year on year.
  • The company acquired an equity stake of ~72% in PLUSS Advanced Technologies (PLUSS), a specialty materials research and manufacturing company in fields of Phase Change Materials (PCM) for thermal energy storage and special polymeric additives for enhancing mechanical and barrier properties.

Outlook: As per the management, higher freight costs particularly in ceramics resulted in operating margin compression. However, with subsiding cost push on raw materials and energy and price pass-throughs anticipated further, margins can improve with calibrated price increases.

Capex is targeted at Rs. 130 Cr for FY22 of which Rs. 71 Cr has been incurred in H1FY22. Management will focus mainly on abrasives and ceramics.

Management forecasts a double-digit growth across segments as a result of the demand environment. Despite headwinds on commodity prices, management expects to pass bulk of price increases and coupled with cost efficiency and portfolio optimisation looking at stable margins.

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