- Revenue grew 10% YoY but fell 19% QoQ – a warning sign of volatile demand.
- Production of flagship black galaxy granite slipped 3% QoQ, absolute black granite down 10%.
- EV/EBITDA multiples: 15x FY27E versus 12x FY28E – valuation compression ahead.
- Motilal Oswal lifts target to INR 1,700 – still a 30% upside from current levels.
- Sector peers (Tata Stone, Adani Granite) are seeing divergent trends – positioning matters.
You’re overlooking MIDWEST’s 10% top‑line gain—here’s why that matters now.
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MIDWEST's Revenue and Production Trends in 3QFY26
Midwest reported INR 1.3 billion in revenue for the March‑quarter, a 10% year‑on‑year lift that comfortably beat the consensus of INR 1.9 billion. However, the quarter also delivered a 19% drop from the previous quarter, signaling a sharp contraction in short‑term demand. The company’s core product, black galaxy granite, saw output dip to 15.3 k cubic meters, a 3% QoQ decline, while absolute black granite fell 10% to 9.5 k cubic meters. Sales mirrored the production weakness: black galaxy granite sales slipped 6% and absolute black granite fell 17%.
Why the EV/EBITDA Multiple Matters for Valuation
Motilal Oswal values MIDWEST at 15× EV/EBITDA for FY27E and trims the multiple to 12× for FY28E, reflecting expected earnings pressure. EV/EBITDA (Enterprise Value divided by Earnings Before Interest, Taxes, Depreciation, and Amortisation) is a preferred metric in capital‑intensive industries because it strips out capital structure differences and non‑cash charges, offering a cleaner view of operating profitability. A compression from 15× to 12× suggests the market anticipates slower cash‑flow growth or higher capital needs, a red flag for investors relying on earnings momentum.
Sector Landscape: How Peers Are Navigating the Granite Cycle
The natural stone sector is cyclical, driven by construction activity, infrastructure spending, and luxury‑segment demand. Tata Stone, a larger diversified player, has maintained a stable 4% QoQ production growth by shifting focus to engineered quartz, cushioning itself against raw granite volatility. In contrast, Adani Granite has doubled its export‑focused capacity, targeting overseas luxury markets that are less sensitive to domestic policy shifts. MIDWEST’s reliance on a narrow product mix makes it more vulnerable to domestic demand swings, especially when government housing schemes tighten credit.
Historical Context: What Past Downturns Teach Us
Looking back at the 2018‑19 period, MIDWEST posted a similar 12% YoY revenue rise while its QoQ growth turned negative. The stock rallied briefly on the headline growth but then fell 23% over the next six months as inventory buildup forced price concessions. The eventual recovery only materialised after the company diversified into engineered stone and renegotiated supply contracts, lifting EBITDA margins from 8% to 13% by FY22. The pattern underscores that headline growth can be deceptive when underlying volume and margin pressures are ignored.
Fundamental Drivers: Margin Pressure and Cost Structure
Midwest’s cost base is heavily weighted toward quarry extraction and logistics. A 10% drop in absolute black granite volumes translates directly into higher per‑unit extraction costs, eroding gross margins. Additionally, fuel price volatility inflates transportation expenses, which in FY26E are projected to rise 6% year‑on‑year. The company’s EBITDA margin, currently hovering around 9%, is below the sector median of 12%, indicating room for operational improvements but also highlighting current inefficiencies.
Investor Playbook: Bull vs. Bear Cases
Bull Case: The 10% YoY revenue bump signals a rebound in domestic luxury construction, which could accelerate in FY27 as credit conditions ease. If MIDWEST successfully expands into engineered stone, the higher‑margin product mix could lift EBITDA margins to 12‑13%, justifying a re‑rating of the EV/EBITDA multiple back to 15×. The revised target of INR 1,700 would then represent a 35% upside from current market levels.
Bear Case: Continued QoQ revenue contraction, coupled with falling production volumes, may force the company into deeper discounting to clear inventory. A prolonged margin squeeze could push the EV/EBITDA multiple down to 9×, driving the stock below INR 1,200. Additionally, any slowdown in the broader construction sector or a resurgence of input‑cost inflation would exacerbate the downside.
In sum, while Motilal Oswal’s BUY rating and INR 1,700 target provide a compelling upside narrative, investors must weigh the hidden volatility in MIDWEST’s core granite business. A disciplined approach—monitoring QoQ volume trends, margin trajectories, and the company’s diversification progress—will be crucial to navigating the next 12‑18 months.