Motilal Oswal sets stock target on Midwest, Shares rally 9%: Check the upside now

SYNOPSIS: Midwest shares hit a 52-week high after Motilal Oswal initiated coverage with a Buy rating, citing strong granite leadership, quartz-led expansion, superior margins, and long-term diversification-driven growth potential.

Shares of one of the leading quartz processors and India’s largest producer & exporter of black galaxy granite and absolute black granite, surged nearly 9 percent to hit a new 52-week high at Rs. 1,834.9 on NSE. Brokerage firm Motilal Oswal sees a potential upside of over 48 percent, on the back of strong core, strategic diversification and superior profitability.

With a market cap of Rs. 6,461 crores, shares of Midwest Limited closed in the green at Rs. 1,786.65 on BSE, up by around 6 percent, compared to its previous closing price of Rs. 1,685.5.

The Rs. 451-crore Midwest IPO made a decent debut on Friday, 24th October, listing at Rs. 1,165 per share on both the NSE and BSE – a 9.4 percent premium over the IPO issue price of Rs. 1,065. Since its listing, the stock has jumped by around 57 percent till now.

Brokerage Target & Outlook

Midwest Limited is engaged in the business of exploration, mining, processing, marketing, distribution and export of natural stones. It is India’s largest producer and exporter of Black Galaxy Granite, commanding ~64 percent share of the Indian export market in FY25, with exports of 44,992 cubic meters during the year. 

The company is also the largest producer of Absolute Black Granite in India, accounting for 15.7 percent of the country’s black granite production in India during FY25.

Brokerage firm Motilal Oswal Financial Services has initiated coverage on Midwest Limited with a “buy” rating and a target price of Rs. 2,000 per share, implying a potential upside of around 19 percent from its previous close. Its positive stance is underpinned by the company’s strong core business, strategic diversification, and superior profitability. The target price is derived by valuing the company at 13x FY28E EV/EBITDA.

Midwest Limited is vertically integrated across the granite supply chain, operating 20 mines, and generated revenues of nearly Rs. 630 crores in FY25, translating into a 5-year CAGR of over 21 percent. 

Its granite (core operations) volumes are projected to scale up to around 1,50,000 CBM by FY28, driven by new mine- and cluster-based expansions. This is likely to support steady and sustained earnings growth, with revenue and EBIT projected to grow at a ~12 percent CAGR each over FY25-28E. A key growth lever is the quartz processing plants, where Phase II expansion entails a capex of about Rs. 130 crores, doubling capacity to 600 ktpa by FY27E from the current 300 ktpa. 

This expansion is well aligned with domestic demand, which is expected to grow at a ~25 percent CAGR. Additionally, the company is entering the mining and processing of heavy mineral sands (HMS) – used as feedstock for titanium dioxide – supported by the acquisition of 4 mines in Sri Lanka.

Midwest also stands out in profitability, with a best-in-class EBITDA margin of 27.4 percent and an EBITDA CAGR exceeding 44 percent over the same period, outperforming its granite industry peers. Management’s multi-pronged growth strategy focused on strengthening leadership in Black Galaxy and Absolute Black granite, while diversifying into higher-growth segments like quartz grit & powder, and beach-sand heavy minerals.

Motilal Oswal flagged key risks including export market concentration, regulatory uncertainties, potential delays in scaling up quartz production, and the sensitivity of granite demand to global real estate cycles.

In its bull-case scenario, the brokerage assumes the average granite volumes to grow at a 12 percent CAGR during FY25-28, with blended pricing of Rs. 60,000 per CBM. Quartz volumes are expected to reach 0.4 million tonnes as plant utilisation improves to over 60 percent by FY28, at an average realisation of Rs. 15,000 per tonne.

Under these assumptions, revenue and EBITDA are projected to grow at 40 percent and 56 percent CAGR, respectively, over FY25-28. EBITDA margins are expected to expand to 38 percent, compared with 34 percent in the base case and 26 percent in FY25, driving a 67 percent CAGR in PAT. Based on this upside scenario, Motilal Oswal assigns a higher target price of Rs. 2,500, implying an upside of more than 48 percent.

Midwest reported a significant growth in revenue from operations, experiencing a year-on-year increase of around 13 percent, from Rs. 141 crores in Q2 FY25 to Rs. 159 crores in Q2 FY26. Likewise, its net profit increased during the same period from Rs. 15 crores to Rs. 28 crores, representing an impressive rise of nearly 87 percent YoY.

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