Vesuvius India Ltd. - Weak quarter; Analyst Meet KTA - Company Update

Vesuvius India’s (VIL) 1QCY26 results were a miss to our estimates due to lower than expected sales volume growth. Despite some cooling in alumina cost, high magnesia cost along with rising freight cost and rupee depreciation has kept gross margins under pressure. This along with high operating expenses led to a fall in margins. In the Analyst Meet conducted by VIL, the leadership indicated that the focus will be to sweat the newly commissioned capacities and outperform the steel industry growth through market share gains, new product additions and premium offerings, while mitigating raw material inflation through group-level sourcing efficiencies and price hikes. While we acknowledge VIL’s leadership in flow control, technology expertise in advanced refractories and an edge in services, we turn cautious on the growth story due to overcapacity, aggressive price cutting and competition. We have downward revised our earnings estimates in CY26E & CY27E to account for the slowdown in growth and margin pressure. We value VIL at 34x Mar’28E PER to arrive at a TP of Rs 550 (previously Rs 565). Advise accumulate on dips.

Miss on revenue:

VIL’s 4% yoy; -9% qoq revenue growth leading to Rs 5bn in 1QCY26 was a miss to our estimate of Rs 5.2bn. We believe that the subdued growth (lower than the 8% underlying growth in crude steel production) is largely due to weak sales volume.

Margins remain resilient despite input cost headwinds:

Despite some cooling in alumina cost, high magnesia cost along with rising freight cost and rupee depreciation has kept gross margins under pressure. This along with high operational expenses (due to surge in fuel cost) has translated into 49 bps; 27 bps decline in EBITDA margins at 16.7%. Adj. PAT also declined by 6% yoy; 12% qoq to Rs 559mn, dragged down by high depreciation from the newly commissioned Vizag plant.

Analyst Meet 2026 – focus shifts on sweating of new capacities:

VIL has maintained market share of ~50% through technology-led differentiation, especially in flow control, while expanding its presence in non-steel applications, induction furnaces and furnace lining solutions. New products contributed 20–25% of CY25 revenues, with AlSi monolithics, plastic refractories and mould flux witnessing strong ramp-up. The company has ample capacity headroom at both Vizag and Kolkata facilities, with mould flux already fully booked and brownfield expansion plans at Kolkata under discussion to support future growth. Despite increasing competition in refractories, VIL believes its strong R&D backing from parent, specialized product focus and service-led model will help sustain its competitive edge and margins. Management remains confident of outgrowing the steel industry through market share gains, new product additions and premium offerings, while mitigating cost inflation through group-level efficiencies and price hikes.

Reducing growth and turning cautious due to rising competition:

We believe VIL has an edge in the market due to technology expertise in flow control refractories, along with pioneer position in services. Further, ramp up of the new Vizag plant (backed by capacity expansion by its key customers), will lead to operational efficiencies and ensure the growth momentum continues. Their clear strategy to focus on domestic markets, net cash balance sheet, high cash flow conversion and cautious inorganic growth policy is all expected to maintain best in industry performance. However, heavy price cutting by peers, market share loss and over-supply in the domestic refractory capacity is already leading to a dent in sales volume growth for VIL. This is the main reason for the cut in revenue estimates, followed by reduction in margins (due to war led inflation), leading to earnings cut of 7%/ 4% in CY26E/ CY27E.

Valuation and rating:

We value VIL at 34x Mar’28E PER (previously 35x) to arrive at a TP of Rs 550 (previously Rs 565) and retain Accumulate rating due to limited upside.  We have lowered our PE multiple to 34x (previously 35x) to account for the slowdown in growth and rising competition. Both, cut in earnings and multiple is the reason for downward revision in TP. Key risks: Loss of market share and delay in new product ramp up.

Company website: https://www.vesuviusindia.in/

*CMP is as per report published date

Click to download the full Vesuvius India Ltd. 1QCY26 Company Update

Analyst:

• Sahil Sanghvi - Research Analyst, Institutional Equities (NISM-201900004744)
• Uvais Khatri - Research Associate, Institutional Equities (NISM-202300049054)

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FAQs on Vesuvius India Ltd. 1QCY26 Company Update

1. What impacted Vesuvius India’s Q1CY26 performance?

Lower-than-expected sales volume growth, rising magnesia and freight costs, rupee depreciation, and higher operating expenses impacted profitability during Q1CY26.

2. Why is the company still considered structurally strong?

Vesuvius India maintains leadership in flow control refractories, benefits from strong R&D capabilities, premium products, and long-standing customer relationships in the steel sector.

3. What are the major growth drivers for Vesuvius India?

Growth is expected from market share gains, new product additions, premium refractory offerings, and utilization ramp-up at newly commissioned capacities.

4. What are the key risks for the company?

Key risks include rising competition, aggressive pricing by peers, slowdown in steel demand, margin pressure from raw material inflation, and delays in product ramp-up.

5. What is the current analyst view on Vesuvius India stock?

Analysts maintain an Accumulate rating with a target price of Rs 550, while remaining cautious due to limited upside and increasing competitive intensity.

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