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Multi Baggers

Hem Securities

12.00 AM Nov 15th 2017

Carborundum

BSE ID : 513375     NSE ID : CARBORUNIV

RECOMMENDED PRICE 370.00

PEAK FROM RECO 1008.00 172.43%

CURRENT PRICE 910.65 146.12%

Carborundum Universal, popularly known as CUMI, is engaged in manufacturing of coated and bonded abrasives, super refractories, electrominerals, industrial ceramics and ceramic fibres in India. Looking at increase in production capabilities, decent financials & strong industry outlook, we recommend ``Buy`` on the stock with price target of Rs 480 (appreciation of almost 30%) for long term investment.

During Q2FY18, co has posted strong growth in its topline as well as bottomline. On QoQ basis, co has shown decent jump of almost 46% in its Operating profit at Rs 106 Cr in Q2FY18 from Rs 72 Cr in Q1FY18 while bottomline of company has witnessed the rise of 38% from Rs 40 Cr in Q1FY18 to Rs 55 Cr in Q2FY18. Also co has seen consistent growth in its financials since FY11.Along with it, co has posted consistent Return on Shareholder’s fund of about 12%-13 % since FY15 & has shown consistent return on capital employed in range of 16%-17 % during the same year. On debt front co has successfully reduced its debt as evident from lowering of debt to Equity ratio from 0.41 in FY13 to 0.11 in Fy17.On margin front too, company has been consecutively posting operating profit margin of more than 12% since FY13 while net profit margin of more than 4% during same year.

In coming years there will be increase in capacity of company along with growth in business not only in India but on a global basis. Presently, in US, sales is up by almost 4.5% - 5% while in Europe it is up by more than 3%. With all this, co is expecting to post approx. Rs. 3,200 crores as overall sales in the time horizon of three-year till FY20. Also with translocating manufacturing plants, repositioning business models, CUMI will see major boost in volumes & in turn better margins going ahead. To enhance co’s capabilities, co acquired the manufacturing assets and customer database for the Metallised Cylinder Plant from NTK Ceramics, Japan and re-installed it at its Industrial Ceramics facility at Hosur. The new facility combined with co’s existing Metz Plant makes it the second largest producer of Metallised Cylinders in the world, besides giving co an access to new markets, new applications.

The company is currently trading at 38.06x of TTM eps of Rs 9.72 while it is trading at 34x of FY18E eps of Rs 12.17 & 24.5x of FY19E eps of Rs 15.06. Looking at increase in production capabilities, decent financials & strong industry outlook, we recommend “Buy” on the stock with price target of Rs 480 (appreciation of almost 30%) for long term investment.

For full details click on attachment

Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advice. Reader is requested to rely on his own decision and may take independent professional advice before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited, Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees to exempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and further agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities there of, company (ies) mentioned herein and the same have acted upon or used the information prior to, or immediately following the publication.

carborundum_Hem.pdf

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