CARBORUNIV - Carborundum Universal Ltd. Share Price

In the Q3 FY '26 earnings call, management provided a cautious yet optimistic outlook for Carborundum Universal Limited. The standalone sales for Q3 FY '26 reached INR 769 crores, up 7.9% from the previous quarter, and saw a year-over-year growth of 5.6%. The growth in key segments was notable, with ceramics rising by 11.9% to INR 255 crores, electrominerals increasing by 7.9% to INR 229 crores, and abrasives growing by 4.9% to INR 323 crores.

Regarding consolidated outlook, the management maintained the guidance for consolidated sales growth at 5.5% to 6.5% for the full year. However, the ceramics growth forecast was revised down from 16%"“18% to 13%"“14%, reflecting delays in project deliveries. Abrasives sales guidance remained unchanged at 4%"“5%, and for Electrominerals, it was also kept at 1%"“2%.

The management highlighted key forward-looking points:

1. PBIT margins for the ceramic segment were adjusted down from 23.5%"“23.7% to 21%"“22%.
2. The abrasives segment's PBIT margin guidance was revised to 4%"“4.5% from the previous 6%"“6.5%.
3. Overall consolidated PBIT margin guidance was adjusted to 7%"“8% from 8.2%"“8.5%.
4. Capital expenditure is projected to be INR 350 crores for the fiscal year, with INR 248 crores already invested in the first nine months.

The management expressed confidence in a stronger Q4 FY '26, especially in the ceramics segment due to a backlog of orders. The adaptation to changing market conditions, particularly due to potential benefits from the EU Free Trade Agreement, was also noted as a positive factor for future competitiveness.

Question 1: "So, first question for the reduced guidance in Ceramics, and we can see that even standalone business is kind of 4% down. So, could you explain what went wrong? And within that, is it the exports from Ceramics which has also been impacted and versus the technical and wear ceramics, how the situation in Ceramics since we are expecting some recovery after Q1, Q2, and we are again revising down the guidance for Ceramics?"

Answer: "We're not revising guidance further, this is our first adjustment. The delay in project timelines affected Q3. Despite this, we believe Q4 will be strong due to a significant order backlog. The challenges are mainly due to customer inspections causing delays in shipping. Looking ahead, we expect improvement as project completions proceed."

Question 2: "So, what's the kind of exports contribution in Ceramics for the first 9 months?"

Answer: "Exports contribute approximately 50% to 55% overall, with industrial ceramics being particularly strong at around 75%. This reinforces our strategic direction in manufacturing."

Question 3: "On Awuko and Rhodius, while you have outlined your performance so far in the 9 months of FY '26, can you broadly highlight how we should think about revenue growth and margin development for both these companies for the next year, that is FY '27?"

Answer: "I'll provide more specific details in our next call. However, current challenges at Awuko concern us, particularly its slow top-line growth. We anticipate addressing these issues and discussing them in our upcoming meeting."

Question 4: "Will it be broadly on similar lines as to what we have seen in the third quarter? Or would there be a material improvement sequentially for the January to March quarter?"

Answer: "For Awuko, we expect similar trends. Profitability may improve as fixed costs spread over increased production, which was previously low due to no manufacturing. Rhodius typically performs better in Q4 due to seasonal changes, which gives us optimism for improvement."

Question 5: "Can this translate into a tangible improvement in the domestic market share for us over time?"

Answer: "Yes, the removal of the export rebate by China is positive for the Indian market. This change in policy should enhance our competitiveness and potentially strengthen our market share in abrasives and other products."

Question 6: "What is the outlook on this business? And how do we plan to improve the performance here?"

Answer: "Foskor's performance troubles us due to significant losses. We're focusing on Z450 and have ceased ZC operations temporarily. We will monitor Q4 performance closely before making any firm decisions on the business's future."

Question 7: "In the domestic Electro Minerals business, what is the mix between domestic revenues and exports within our stand-alone business? Also, is there any material difference in margins between these two?"

Answer: "The export mix in the Electro Minerals sector is improving and we aim for a 30% export target long-term. Currently, we have close to this figure, and margins are better in the export segment compared to domestic revenue."

Question 8: "Could you highlight the performance and growth rates of different sub-segments, mainly refractories, wear ceramics, industrial ceramics?"

Answer: "The overall ceramic business observed muted growth due mainly to delays in project approvals, particularly in wear ceramics. However, engineered ceramics and fire refractories have seen robust performance. We anticipate growth in FY '27 to be around 9% to 11% after a strong Q4."