Carborundum Universal Q2 Results Review - Performance A Mixed Bag: ICICI Securities

ICICI Securities Report

Carborundum Universal Ltd. has reported a mixed set of numbers with in-line revenue performance while profitability was hit due to higher raw material cost and consolidation of new acquisitions.

Consolidated revenue grew 34% YoY to Rs 11.3 billion (our estimate: Rs 11.8 billion) led by 49% / 21% / 27% YoY growth in abrasives / ceramics/ electro minerals, respectively.

The recently acquisitions, Rhodius and AWUKO, contributed Rs 1.28 billion in Q2 FY23 versus Rs 1.8 billion in Q1 FY23 to sales. Consolidated Ebitda margin came in lower at 14.5% (our estimate: 14.8%) due to increase in raw material cost, operational losses at Rhodius and AWUKO, and integration expenses.

Management indicated that losses are likely to continue in the near- to medium-term for both the subsidiaries.

Ceramics and EMD segments reported strong Ebit margins, which partly offset the decline in abrasives segment.

We consider Carborundum a strong play on industrial capex, and remain optimistic on it due to its highly diversified product portfolio, and net cash balance sheet.

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