Sell Carborundum Universal; target of Rs 318: Kotak Securities
Kotak Securities’ research report on Carborundum Universal
CUMI Q2FY18 PAT outperformed our estimate on back of higher margin in the Electrominerals division (EMD). Revenues at Rs 5.8 Bn came in line with our estimate. Management highlighted that the abrasives business has started to make up for the lost volumes in the previous quarter due to GST transition and would further report traction in 2HFY18. Industrial ceramics and EMD division have been witnessing rising demand across geographies. Company’s Russian subsidiaries VAW reported significant volume led growth in the quarter.
We however believe that the company would take slightly longer to recover from GST led disruptions in the Indian market and accordingly tweak FY18/FY19 revenue estimates. We value CUMI stock at 21x FY19 estimated earnings and maintain ‘SELL’ recommendation with revised price target of Rs 318 (Rs 324 earlier).
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