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Mixed Q2; subsidiaries’ performance in focus Quick Pointers:

* Management retained Rs51-52bn consol. revenue guidance but cut PBIT margin guidance to a ~100bps decline (from 20-30bps improvement)

* Completed 100% acquisition of Silicon Carbide Products at EV of $6.66mn.

We revise our FY25/26E EPS estimates by -9.5%/-4.0% factoring in weaker profitability in AWUKO and Foskor Zirconia, but upgrade the rating to ‘Accumulate’ from ‘Hold’ with a revised SoTP-based TP of Rs1,601 (Rs1,650 earlier) given the recent correction in stock price. Carborundum Universal (CU) reported 7.6% YoY sales growth and 131bps YoY rise in EBITDA margin to 15.9%. Demand for ceramics remains strong across geographies from sectors such as carbon black, steel, cement, chemicals, and power distribution. CU’s expansion into HPSiC as well as engineered ceramics for semiconductors and defence is on track, with ~Rs3bn capex planned for FY25. Delays and capacity constraints have led management to significantly cut FY25 guidance for AWUKO, while RHODIUS performance is largely in line with plans. Meanwhile, rising alumina costs and strong pricing pressure from Chinese dumping is impacting the Electrominerals business.

We believe CU will perform well in the long run given 1) healthy domestic demand, 2) capacity expansion in Electrominerals and Abrasives 3) valueadded product launches in Engineered ceramics, 4) strong market reach and exports, and 5) improvement in RHODIUS & AWUKO. However, pricing pressure from Chinese competition will be a key monitorable. The stock is trading at a P/E of 52.3x/40.1x/33.4x on FY25/26/27E earnings. We roll forward to Sep’26 and value Abrasives/Ceramics/Electrominerals at 37x/50x/26x Sep’26E EPS (40x/55x/30x FY26E earlier). Upgrade to ‘Accumulate’.

Decent growth across segments with better margin in Ceramics: Consol. sales grew 7.6% YoY to Rs12.1bn (PLe: Rs12.3bn). Abrasives sales rose 6.4% YoY to Rs5.4bn led by standalone, AWUKO, RHODIUS and VAW. Abrasives EBIT margin fell to 6.3% (vs 7.3% in Q2FY24) owing to lower profits in Sterling Abrasives, America & AWUKO. Ceramics sales grew 5.5% YoY to Rs2.8bn on higher volume & price realization in standalone business, and better performance in Australia & America. Ceramics margin stood at 28.5% (vs 27.8% in Q2FY24) driven by higher standalone profitability. Electrominerals sales grew 6.5% YoY to Rs4.0bn driven by higher volume, realization and export sales in standalone, along with growth in VAW & Foskor Zirconia (FZL). Electrominerals margin fell to 14.3% (vs 16.3% in Q2FY24) due to increase in alumina cost and pricing pressure from Chinese imports, while FZL was impacted by strengthening of RAND vs USD. Consol. EBITDA grew 16.4% YoY to Rs2.0bn (PLe: Rs2.1bn). EBITDA margin expanded by 131bps YoY to 15.9% (PLe: 17.3%%) on account of lower other expenses (-3.4% YoY to Rs2.7bn vs a high base in Q2FY24), partly offset by a lower gross margin. Adj. PAT increased by 13.7% YoY to Rs1.2bn (PLe: Rs1.4bn), driven by an improved operating performance while other income fell 42.3% YoY to Rs113mn.

Sequential dip in RHODIUS & AWUKO: RHODIUS Q2FY25 sales stood at €16.5mn (+8.5%/-4% YoY/QoQ) while loss after tax stood at €0.4mn (vs €0.3mn PAT in Q1FY25). AWUKO Q2FY25 sales stood at €2.2mn (+17%/-20% YoY/ QoQ). AWUKO/RHODIUS saw Rs50/90mn sequential decline in PBIT.

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