Carborundum Universal: semiconductor materials bet, 91x PE

Carborundum Universal (NSE: CARBORUNDUM) is a Murugappa Group company in abrasives, electrominerals and ceramics. It supplies semiconductor wafer fabrication equipment with precision ceramic components, substrates and high-purity silicon carbide and fine ceramic powders for power electronics, rather than making chips itself. What happened: Q1 FY27 consolidated revenue grew 16.9% YoY to Rs 1,411 crore. Operating profit rose 11.6% to Rs 135 crore, but margins contracted 100 bps to 9% as newly commissioned semiconductor and aerospace capacity weighed on Industrial Ceramics margins. Net profit surged 33.3% to Rs 80 crore. Management raised its full-year FY27 revenue guidance to 15%. Why it matters: Carborundum commissioned a specialised ceramics plant in Hosur, Tamil Nadu for wafer fabrication equipment components. The Electrominerals division is expanding capacity for 5N-purity High-Purity Silicon Carbide and establishing a pilot for 6N-purity HpSiC. Commercial supply of ceramic components has begun based on initial customer qualifications. Management expects semiconductor revenue to scale noticeably from FY28, with peak contribution around FY30, underpinned by development partnerships with global anchor OEMs. What I am watching: Margin recovery in Industrial Ceramics as capacity fills, 6N HpSiC qualifications with anchor OEMs, and the FY28 revenue inflection in the semiconductor segment. My stance: The abrasives and ceramics core is growing well. At 91x PE versus a three-year median of 64x, with ROE of 6.9% and ROCE of 10.5%, the market prices in FY30 peak earnings today. That is a long runway without a margin recovery signal. I do not hold a position in Carborundum Universal at the time of writing. This is not investment advice.