Carborundum Universal (CU IN) – Q4FY26 Result Update – Mixed Q4, subsidiaries recovery remains a key to watch – Downgrade to ‘REDUCE’

Carborundum Universal (CUMI) reported a mixed Q4FY26 performance with consolidated revenue growth of 15.4% YoY to driven by broad-based growth across Abrasives (+13.4% YoY), Ceramics (+18.6% YoY) and Electrominerals (+14.0% YoY) while EBITDA margins contracted by 171bps due to weakness Rhodius abrasives, Awuko abrasives and Foskor Zirconia. The Abrasives segment witnessed healthy recovery supported by dealer additions, new product launches, GST-led demand normalization and improving retail and industrial demand, while export competitiveness also improved following reduction in Chinese export incentives. Ceramics continued to benefit from traction in engineered ceramics, SOFC-linked applications and metallized cylinders, whereas Electro Minerals growth was led by exports of treated grain products aided by anti-dumping duties on Chinese imports in Europe. However, consolidated profitability remained impacted by continued losses in overseas subsidiaries including Awuko, Foskor Zirconia and VAW Russia, leading the company to initiate restructuring and closure measures in Awuko and Foskor Zirconia. Going forward, management expects underlying growth momentum to remain stable across core businesses, supported by investments advanced ceramics, semiconductor-related applications and export opportunities, although normalization in overseas subsidiaries and global demand conditions remain key monitorable. We roll forward to Mar’28E and downgrade our rating from ‘Hold’ to ‘Reduce’ given recent rally in stock price with a SoTP-based revised TP of Rs986 (Rs825 earlier) valuing Abrasives/Ceramics/Electrominerals at 33x/40x/15x Mar’28E (30x/34x/15x Sep’27E).