Vesuvius India Ltd. - Subdued quarter | Company update

We lower target price to Rs 565 (previously Rs615) and move to Accumulate rating for Vesuvius India Ltd (VIL). Cut in earnings has mainly led to lower TP. 4QCY25 was a miss to our estimates and lower than the underlying crude steel production growth of 10% for the same quarter. Margins remained stable due to benefits of price hikes and low alumina cost, partially offset by high employee and operational cost at new Vizag plant. While we acknowledge the leadership in flow control, technology expertise in advanced refractories, edge in services and esteem customer base of VIL, we turn cautious on the growth story due to aggressive price cutting and competition by peers. Additionally, at CMP, stock trades at 32x CY27E valuation, limiting upside. Advise accumulate on dips.

Miss on revenue:

VIL’s 8% yoy; flat qoq revenue growth leading to Rs5.51bn in 4QCY25 was a miss to our estimate of Rs5.75bn. We believe that the subdued growth (lower than the 10% underlying growth in crude steel production) is either due to slowdown in large project (new steel capacities) orders or due to rising competition. For CY25, revenue grew by 13% yoy to Rs21bn, led by offtake to new steel capacities and price hikes.

Margins remain steady supported by price hikes:

Despite some cooling in alumina cost and price hikes in flow control refractories, high magnesia cost has pressured gross margins. This along with high employee cost (year-end increment) and operational cost (from the new Vizag plant) has translated into stable EBITDA margins at 17%. CY25 margins moderated by 147bps yoy to 17.1%, due to RM cost pressure and operational cost at new greenfield plant. Adj. PAT increased by 5% yoy to Rs632mn despite high depreciation. We have adjusted the PAT for one time gain on sale of land at old Vizag plant and its tax expense. For CY25, Adj. PAT declined by 1% yoy to Rs2.47bn.

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 and over-supply in the domestic refractory capacity can dent growth for VIL. This is the main reason for the cut in earnings of 8%/ 12% in CY26/ CY27E. On CMP of Rs503, stock trades at valuation of 32x CY27E PER, limiting upside.

Valuation and rating:

We value VIL at 35x Dec’27 PER (unchanged) to arrive at a TP of Rs565 (previously Rs615) and move to Accumulate rating due to limited upside. Cut in earnings is main reason for reduction 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. 4QCY25 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. 4QCY25 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.

2. What impacted Vesuvius India’s Q4CY25 revenue growth?

Revenue growth lagged underlying steel production growth due to slower large project orders and increasing competitive intensity in the refractory market.

3. How did Vesuvius India maintain stable margins?

Margins remained stable because of price hikes in flow control refractories and lower alumina costs, partially offset by high magnesia costs and operational expenses.

4. What are the long-term growth drivers for Vesuvius India?

Key growth drivers include technology leadership, premium refractory products, operational efficiencies from the Vizag plant, and strong relationships with steel manufacturers.

5. What are the key risks for Vesuvius India?

Major risks include market share loss, rising competition, refractory overcapacity, aggressive price cuts by peers, and delays in new product ramp-up.

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