Prabhudas Lilladher has upgraded its outlook on Carborundum Universal, setting a target price of ₹1,178. While the company’s recent quarterly profit fell sharply due to the closure of a loss-making German unit, the brokerage remains positive on the strong growth of its ceramics business and strategic efforts to clean up the balance sheet.
Brokerage firm Prabhudas Lilladher has updated its view on Carborundum Universal (CUMI), assigning an 'Accumulate' rating with a target price of ₹1,178 per share. This move comes as the company continues to reshape its business portfolio, balancing a strong performance in its ceramics division against the costs of shutting down underperforming global units.
Impact of Restructuring on Profits
The company's latest financial results for the second quarter ending in 2026 showed a mixed picture. While consolidated revenue grew by 13.25% year-on-year to ₹1,470 crore, the net profit saw a significant drop to ₹12 crore, compared to ₹74 crore in the same period last year. This decline was primarily driven by a one-time charge of ₹80 crore linked to the closure of its German subsidiary, CUMI Awuko Abrasives GmbH. Investors should note that while this impacts short-term profitability, the management describes this as a strategic move to eliminate loss-making operations and reduce future financial stress.
Growth in Ceramics Segment
The optimism from the brokerage is largely supported by the company’s ceramics division, which expanded by 36.1% in the second quarter. Driven by rising demand for industrial engineered ceramics and metallized cylinders, the company has raised its full-year growth guidance for this segment to 25%–28%. Furthermore, the company is positioning itself to enter the semiconductor equipment components market, with management projecting a potential revenue contribution of ₹350 crore from this area by 2031. To support these changes, the board has also appointed Shri Ashutosh Singh as Executive Director for Vertical-3.
Risks and Monitorables
Despite the positive long-term outlook, investors should remain aware of potential challenges. The abrasives business is currently facing margin pressure, largely due to high raw material costs. While management expects a recovery as they pass these costs to customers and stabilize fuel expenses, success is not guaranteed.
Additionally, there is an execution risk associated with the company’s long-term bet on the semiconductor components market. Future earnings will also depend on how effectively the company manages the remaining international restructuring and whether it can maintain its margins in the core abrasives segment. Investors may want to track the actual improvement in profit margins and the progress of the company’s cost-cutting initiatives in the upcoming quarters.