Carborundum Universal a Murugappa Group Company is engaged into manufacturing coated abrasive product with 26 million sq. meter capacity as also manufacturing monolithic refractories and other abrasives.

The company has recently acquired 84.14% in Volzhsky Abrasive works in Russia, which is the largest producer of Silicon Carbide Abrasives with capacity of 65,000 TPA and had sales of Rs.220 crores in 2006. This company also produces Bonded Abrasives and Refractories.

The equity capital of the company is at Rs.18.67 crores (FV Rs.2) with promoters stake at 43% MF, Bank, FIIs at 23% and 37% held by Public.

For FY 07 the company posted total income of Rs.486 crores (Rs.421 crores for FY 06) and EBITDA of Rs.109.27 crores (Rs.116.87 crores of FY 06). This was lower due to lower other income of Rs.21.42 crores in FY 07 against Rs.48.36 in FY 06. Due to this, PBT was lower at Rs.85.33 crores (Rs.100.66 crores in FY 06) and PAT was at Rs.58.66 crores (Rs.76.61 crores in FY 06) resulting in an EPS of Rs.6.28.

Due to lower bottomline, share price of the company fell to around Rs.155 against its high of Rs.215. However, if we analyze quarterly performance of FY 07, they are on an uptrend.

The company has also made small acquisitions in Central India and commenced operations of its new coated abrasive plant in Tamil Nadu for Rs.50 crore for 15 million sq. meters of Coated Abrasive Product. With acquisition of Russian plant the financial performance of the company is likely to post good growth of 30 to 40% in FY 08 and FY 09.

The company is likely to post a topline of Rs.650 crores and bottomline of Rs.75 crores resulting in an EPS of Rs.8 for FY 08. The share is presently ruling at Rs.155, available at a PE of close to 20. This industry commands a higher PE multiple and the company being leader in the industry always had a higher discounting.