Result Update Carborundum Universal Company Reports

Result Update Carborundum Universal Company Reports

Carborundum Universal : Near Term Pain But Recovery Ahead

Reco : Hold    Cmp : 151    Target : 156

Carborundum Universal (CUMI) reported 34% YoY decline in EBITDA to Rs 781 mn and 49% YoY decline in PAT to Rs 338 mn. Margin pressure was witnessed due to lower customer demand and rising input costs. 

However, we remain confident of margin improving due to price hikes taken by the abrasive division towards the end of Q2 and cost cutting initiatives by the company.

Key highlights

Abrasives division: Weak demand from end-user segments led to flat YoY revenue growth of Rs 2 bn. Higher input cost, largely due to increased power tariffs resulted in EBIT margin contracting 380 bps YoY to ~11. However, CUMI was able to increase product prices in September, which should help offset any cost increase. We reduce our FY13 EBIT margin estimate to 11.5% (vs. 13% earlier) but maintain FY14 margin at 14%.