Carborundum Universal Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

2

• Chandramouli, G. (Advisor and Head of Investor Relations)
• Rangarajan, Sridharan (Managing Director)

Analysts

9

• Anwani, Amit (PL Capital)
• Jain, Varun (Dolat Capital)
• Kapoor, Sajal (Antifragile Thinking)
• Kochar, Pravesh (FourLion Capital)
• Mongia, Aditya (Kotak Institutional Equities)
• Patel, Harshit (Equirus Securities)
• Shah, Kunal (DAM Capital Advisors)
• Swaminathan, Ravi (Spark Capital Advisors)
• Thakur, Akshay (Helios Capital)

Financials & KPIs

Geographic & Segment Commentary

Standalone Abrasives: Sales grew 14.7% YoY to ₹328 crores, driven by both domestic and export demand; QoQ declined 6.9% due to Q1 seasonality. PBIT margin fell to 10.4% from 13.1% YoY, impacted by ~₹16 crores raw material cost push from the US-Iran conflict (oil-based resins and fuel) and ~₹8-9 crores volume drop, partially offset by price increases.

Consolidated Abrasives: Sales grew 20.1% YoY to ₹610 crores. Rhodius sales grew 18% in EUR terms (EUR15.6M) with loss improving to EUR0.7M from EUR1.6M; FY27 guidance maintained at 5% growth with small PAT loss. AWUKO (in voluntary winding-up) reported EUR2.89M sales with EUR1.69M loss; exceptional item of ₹119 crores recognized in Q4 FY26. Consolidated PBIT included ₹25 crores gain from Sterling Abrasives sale.

Standalone Electro Minerals: Sales grew 33% YoY to ₹282 crores, predominantly volume-driven with export salience rising from 35% to ~40% trajectory (up from 20% historically). PBIT surged to ₹39 crores from ₹7 crores YoY, driven by strong global demand and product mix improvement.

VAW Russia: Sales declined 14.1% YoY in RUB terms (RUB1.58 billion) but grew 3.1% in INR terms (₹201 crores); sequential growth aided by RUB depreciation. PAT was RUB52.1 million vs RUB71.5 million YoY. Business remains domestic-centric, compliant with sanctions; management adopting "stay put" approach.

Consolidated Electro Minerals: Sales grew 16.8% YoY to ₹473 crores. Foskor Zirconia (South Africa, 51% subsidiary) classified as commercially unviable with ₹16 crores asset write-down in Q4 FY26; PBIT impacted by ₹17 crores loss in Q1 FY27. Resolution expected within next quarter.

Consolidated Ceramics: Sales grew 16.5% YoY to ₹349 crores. Standalone growth of 15.2% driven by industrial ceramics and refractories; QoQ decline of 1.6% due to refractory seasonality. PBIT remained flat YoY at ₹74 crores (consolidated) despite revenue growth due to fuel/alumina cost increases and absorbed costs in new semicon and aerospace/defense capacities.

Company-Specific & Strategic Commentary

AWUKO Closure on Track: Voluntary winding-up process of CUMI AWUKO Abrasives progressing well; exceptional items of ₹119 crores already recognized. Management expects completion within one quarter and will update in next earnings call.

Foskor Zirconia Resolution: Couple of options under evaluation following discussions with Foskor partners in South Africa; expects to close process by Q2 FY27. The business was determined unviable due to sustained losses, rising input costs, and market pressure.

Advanced Ceramics Strategy: Multiple growth programs underway—metallized substrates with anchor customer and technology tie-up (revenue from FY28), semiconductor wafer fab equipment components (small in FY27, picking up in FY28, peaking FY30), and aerospace/defense applications ramping from FY28. 5N purity achieved for SiC powders with path to 6N established.

Capex Program: FY27 guidance maintained at ₹400 crores covering advanced ceramics for power electronics (substrates, metallized tubes, rings, brazed assemblies), brownfield alumina expansion, integrated furnace facility for thermal spray powders, and zirconia furnace.

Strategic Portfolio Management: Management takes 4-8 quarters to distinguish temporary setbacks from structural decline before deciding to exit businesses (as with AWUKO and Foskor); new ventures are adjacencies built on core expertise rather than speculative entries.

Silicon Carbide Products (SCP) Acquisition: Niche company acquired for RBSiC (reaction-bonded silicon carbide) products serving wear and impact applications—positioned as superior alternative to alumina-based products; also serves as American anchor for growth.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Abrasives Volume vs. Price Growth & China Competition

• Question: How much of Abrasives growth is volume vs. price, and is there market share gain from Chinese players given reduced incentives? (Ravi Swaminathan, Spark Capital)
• Answer: Growth "predominantly volume-driven" with very small price increase. Management seeing early signs of Chinese import competition easing but needing to wait given multiple factors (export benefit withdrawal, exchange rates). Positive trend overall. (Rangarajan)

Ceramics Guidance Upgrade Drivers

• Question: Where within Ceramics is growth traction strongest? (Ravi Swaminathan, Spark Capital)
• Answer: Growth optimism in all segments except wear ceramics (normal growth); metallized cylinders, engineered ceramics all seeing "increased growth momentum." Growth predominantly export-driven. (Rangarajan)

Semicon/Aerospace Revenue Trajectory

• Question: How will FY27/FY28 revenue recognition look for semiconductor, aerospace, and defense programs? (Harshit Patel, Equirus)
• Answer: Metallized substrates facility with anchor customer and technology tie-up completing in FY27 with revenue from FY28 onward; semicon fab equipment components very small in FY27, picking up in FY28, peaking FY30; aerospace/defense also ramping from FY28 after qualification processes. (Rangarajan)

Electro Minerals Export Mix

• Question: What is the export salience in standalone EMD and is it benefiting from EU duties on Chinese imports? (Aditya Mongia, Kotak)
• Answer: Export salience moved from ~20% to 35% last year, now on 40% trajectory. Growth is a "consequence of long, sustained effort" through global qualification processes; current European opportunity adds to this momentum, with similar efforts in US and Asia. (Rangarajan)

VAW Russia Strategy

• Question: How should one think about VAW medium-to-long term given sanctions? (Amit Anwani, PL Capital)
• Answer: No broader change in how business operates—domestic-centric focus maintained; too difficult to predict geopolitical outcome; approach is to comply with all laws, serve domestic market, "stay above the water," and preserve profitability and cash flow. (Rangarajan)

Abrasives Margin Deviation

• Question: Consolidated abrasives EBIT margin close to 2.5% ex-Sterling gain versus 9.5-10% guidance—any comments? (Varun Jain, Dolat Capital)
• Answer: Management maintains guidance with AWUKO losses excluded; current quarter still includes AWUKO losses, which explains the apparent gap. (Rangarajan)

Cost Push Impact Breakdown

• Question: Why were margins pressured in Abrasives if Electro Minerals prices didn't increase? (Harshit Patel, Equirus)
• Answer: 80-85% of COGS is grains (3-5% cost growth, offset by price increases); significant cost growth was in oil-based products (resins) and fuel, particularly after the truce broke in May when oil spiked to $117. Combination of resin and fuel cost drove the impact. (Rangarajan)

Capital Allocation Philosophy

• Question: How does management distinguish temporary setbacks from structural decline? (Sajal Kapoor, Antifragile Thinking)
• Answer: AWUKO and Foskor exemplify exits after "enough and more time" was given to perform; management waits at least 4-8 quarters to assess whether trends are temporary or fundamental before deciding. New ventures are adjacencies built on 40-50 years of ceramics expertise, not speculative entries. (Rangarajan)

SCOMET Approval Status

• Question: Has CUMI received SCOMET approval required for ballistic ceramics? (Varun Jain, Dolat Capital)
• Answer: Company has all industry-standard approvals (domestic and international) including NIJ Level III/IV and BIS threat Level IV/V standards, tested in overseas laboratories. (Rangarajan)

SOFC Ceramics Contribution

• Question: Can we expect very strong growth from SOFC this year and what's the contribution? (Amit Anwani, PL Capital)
• Answer: Guidance upgrade is a combination of SOFC ceramics, metallized cylinders, and engineered ceramics growth; individual segment contributions not disclosed. (Rangarajan)

Key Takeaway

Carborundum Universal delivered robust Q1 FY27 growth—standalone sales up 21.2% YoY to ₹846 crores and consolidated sales up 16.9% to ₹1,411 crores—with all three segments contributing. Electro Minerals led with 33% standalone growth driven by exports (salience at ~40%), while Ceramics benefitted from engineered ceramics and metallized cylinders momentum, prompting a guidance upgrade to 23-25% growth. Abrasives faced a ~₹16 crores cost push from US-Iran conflict-driven oil price spikes, compressing standalone PBIT margins to 10.4% from 13.1% YoY. Strategic portfolio cleanup progressed—AWUKO winding-up and Foskor divestment both targeted for resolution within a quarter—while long-term bets in semicon components, metallized substrates, and aerospace/defense ceramics advance with capex of ₹400 crores committed for FY27. Management upgraded consolidated sales growth guidance to 11-12% ex-closures (potentially 15%) and expects to "track to trajectory" with better clarity next quarter; key watchpoints remain the duration of geopolitical disruptions, Foskor/AWUKO execution, and margin recovery in Abrasives as cost pressures normalize.