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Kotak Securities
Carborundum Universal (Accumulate)
CMP: ₹285.50
Target: ₹305
Carborundum Universal’s management has stated that the restructuring of Thukela Refractories and Foskor is moving on track and is expected to finish according to schedule. We believe that the benefits from restructuring exercise should capture fully from 2HFY18 onwards. The company recently announced that it is set to inaugurate and commence production from three new fusion plants in Cochin. The company aims to use this facility to cater to high end exports demand while taking advantage of low cost of production in India.
Carborundum Universal’s growth in the coated and bonded abrasives segment in India and overseas is expected to last into FY18 as well. Sale of value-added premium products continues to remain strong across verticals. Improved economic activity would further lead to increased capacity utilisation across verticals. Carborundum’s board has cleared investment of close to ₹120 crore in 21-MW hydroelectric power in Keerithodu (Kerala). The company could save close to ₹25-30 crore a year (implying an IRR of 21-23 per cent) in power cost, once the project is operational.
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