Vesuvius India Ltd - Another weak quarter | 2QCY26 Company Update

Vesuvius India’s (VIL) 2QCY26 results were a miss to our estimates due to lower than expected sales volume growth. Despite stable alumina cost and industry wide price hikes in flow control refractories, 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 in May’26, the leadership had 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 increased 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 31x Jun’28E PER (previously 34x) to arrive at a target price of Rs 500 (previously Rs 550). Advise accumulate on dips.

Vesuvius India Ltd. Stock Price Chart

Miss on revenue:

VIL’s 2% yoy revenue growth leading to Rs 5.4bn in 2QCY26 was a miss to our estimate. We believe that the subdued growth (lower than the underlying growth in crude steel production and despite the complete industry witnessing price hikes) is largely due to market share loss at integrated steel plants and delays in ramping up production at the new Vizag plant.

Margins deteriorate further:

Despite steady Alumina cost and price hikes for flow control refractories, 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 and high fixed cost at the new Vizag plant - £2mn dent in EBITDA in 1HCY26) has translated into 125 bps yoy compression in EBITDA margins at 16.2%. PAT also declined by 7% yoy to Rs 585mn, dragged down by high depreciation from the newly commissioned Vizag plant.

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 4%/4% in CY26E/ CY27E. Accumulate on dips.

Valuation and rating:

We value VIL at 31x Jun’28E PER (previously 34x) to arrive at a TP of Rs 500 (previously Rs 550) and retain Accumulate rating due to limited upside. We have lowered our PE multiple to 31x (previously 34x) 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 capacity ramp up.

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

*CMP is as per report published date

Click to download the full Vesuvius India Ltd. 2QCY26 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. 2QCY26 Company Update

1. Why did Vesuvius India lower its target price?

The target price was reduced mainly due to lower earnings estimates caused by rising competition, subdued volume growth, and pressure from aggressive pricing by peers.

What is the target price for Vesuvius India?

The supplied research sets a target price of ₹500 per share, revised from ₹550. This is a research-based valuation estimate and should not be considered a guaranteed return.

What is the rating on Vesuvius India?

The supplied research retains an Accumulate rating and suggests accumulating on dips, citing limited upside alongside concerns about growth and competitive pressures.

How did Vesuvius India perform in 2QCY26?

Revenue increased 2% year-on-year to ₹5.4 billion. EBITDA margin declined 125 basis points year-on-year to 16.2%, while PAT fell 7% to ₹585 million.

What affected Vesuvius India's 2QCY26 performance?

Performance was affected by lower-than-expected sales volume growth, market-share pressure, high magnesia and freight costs, rupee depreciation and elevated operating expenses.

What is the outlook for Vesuvius India's Vizag plant?

The Vizag plant's ramp-up is a key monitorable. The supplied research expects improved utilisation to potentially support operational efficiencies, although fixed costs and depreciation have weighed on near-term profitability.

What are Vesuvius India's key competitive advantages?

The supplied research highlights Vesuvius India's technology expertise in flow-control refractories, advanced refractory capabilities and its established services position as key business strengths.

Why has the outlook for Vesuvius India become more cautious?

The supplied research cites aggressive price cutting, rising competition, domestic refractory overcapacity and potential market-share loss as factors weighing on sales volume growth and earnings.

What are the key earnings pressure points for Vesuvius India?

Key pressure points include high magnesia costs, freight expenses, currency depreciation, fuel costs and elevated fixed costs associated with the new Vizag plant.

What are the key risks for Vesuvius India?

The supplied research identifies further market-share loss and delays in ramping up new capacity as key risks. Competitive intensity and input-cost inflation may also affect profitability.

Should investors consider Vesuvius India shares?

The supplied research assigns an Accumulate rating. This represents the research provider's view and is not personalised investment advice or a guarantee of future performance. Investors should conduct independent due diligence and consult a SEBI-registered investment adviser where appropriate.

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