Carborundum Universal Limited

🔴 Bear CaseWhat could go wrong?

1. Margins are being competed away
   EBITDA margin has fallen from 16.7% to 13.4%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
2. Sales are being booked faster than collected
   Receivables are up 42% against revenue up 12%. If customers keep taking longer to pay, reported profit will not turn into cash — and write-offs follow if some never do.
3. The price already assumes success
   The stock trades 86% above its own median multiple. At this level the business has to deliver just to stand still, and a stumble is repriced twice — lower earnings on a lower multiple.
4. Growth barely outpaces inflation
   Revenue compounding at 3.8% a year is close to the rate prices rise, so the business is gaining little ground in real terms. That leaves the share price dependent on a re-rating rather than on earnings growth.
5. Returns on shareholder capital are falling
   ROE has dropped from 14.7% to 5.0%. Each rupee of equity earns less than it did, so profit growth increasingly depends on raising more capital rather than on the existing base working harder.