Carborundum Universal Ltd. share price target

Karvy initiates coverage on Carborundum Universal Ltd (CUMI) with a Buy Rating. CUMI's growth, to be driven by recovery in domestic abrasives and ceramics business at a CAGR of 9.8% and 7.2% during FY15-17E. Restructuring of South-African electro minerals operations to restrict cash loss and benefits of the same are expected to beyond FY17E. We expect the EBITDA and PAT margin to improve by over 400bps during FY15-17E to 17.1% and 8.4% by FY17E. Return ratios, RoE and RoCE, could revive back to 15.9% and 20% by FY17E by improving over 700bps during FY15-17E.

CUMIs 4QFY15 recurring PBT of Rs 523mn was ahead of our estimate due to higher other income. Operational EBITDA (Rs 760mn) was broadly in line. Reported PAT was aided by Rs 565mn of exceptional income.