Motilal Oswal Institutional Equities has initiated coverage on Midwest Ltd with a Buy rating and a target price of ₹2,000, implying an upside of around 23% from current levels. The brokerage described Midwest as a rare combination of a near-monopoly core business with emerging growth optionalities that could materially improve earnings quality over the medium term.
According to Motilal Oswal, Midwest controls over 60% of India’s Black Galaxy granite exports, making it a dominant player in a niche but highly profitable segment. The granite business, which is resource-backed and vertically integrated, continues to deliver best-in-class EBITDA margins of around 27%, supported by disciplined pricing, limited competition and steady export demand. The brokerage expects granite volumes to scale from about 105,000 CBM in FY25 to 150,000 CBM by FY28, translating into a revenue and EBITDA CAGR of roughly 12%, with low incremental capital expenditure and strong cash generation.
While granite currently contributes nearly 96% of revenues, Motilal Oswal highlighted that the investment case has strengthened due to a strategic transition underway. Cash flows from the core granite franchise are being redeployed into two structurally attractive adjacencies—high-purity quartz and beach-sand heavy minerals—which are expected to diversify the revenue mix and improve long-term growth visibility.
The brokerage noted that quartz represents the first visible growth inflection. Midwest has already commissioned its Phase-I quartz plant and plans to double capacity under Phase-II. The company is targeting 99.99% purity quartz, which has applications in semiconductors, solar equipment and optical fibre. With domestic demand for high-purity quartz estimated to grow at around 25% CAGR, Motilal Oswal believes Midwest is well positioned to benefit from import substitution trends. Importantly, the expansion is being funded largely through internal accruals, limiting balance sheet stress.
The second optionality lies in the heavy mineral sands (HMS) segment, where Midwest holds mining leases in Sri Lanka for minerals such as ilmenite, rutile and zircon. While this opportunity is longer-dated and subject to regulatory clearances, operations are expected to commence post FY27. Motilal Oswal views this as strategic exposure to the titanium and critical materials value chain, which remains largely unpriced in the current valuation.
As these new segments scale up, the brokerage expects granite’s contribution to revenues to fall to about 50% by FY28E, even as overall growth accelerates. Motilal Oswal estimates an overall revenue CAGR of around 36% and EBITDA CAGR of 47% between FY25 and FY28E, with adjusted PAT CAGR of nearly 56%, driven by mix improvement and operating leverage.
On the balance sheet front, Midwest’s net debt stands at about ₹2.2 billion, with net debt-to-EBITDA at 1.3x, which is expected to trend below 1x as cash flows improve. The brokerage forecasts operating cash flows in excess of ₹2 billion annually by FY28E, turning free cash flow structurally positive and enabling gradual deleveraging while retaining flexibility for future growth.
Motilal Oswal values Midwest at 13x FY28E EV/EBITDA, which it believes fairly captures the monopoly-like economics of the granite business and the visible growth from quartz, while assigning limited value to the HMS optionality. The brokerage concluded that Midwest offers a differentiated combination of strong core profitability, improving business mix and medium-term earnings acceleration.
Disclaimer: The views and target price mentioned are those of the brokerage firm. Investors are advised to consult their investment advisor before taking any investment decisions.
