Midwest Stock Hits Record High on Motilal Oswal's 'Buy' Call

Introduction

Shares of mining and materials company Midwest surged by as much as 4.59% on Friday, December 26, 2025, to reach a new all-time high of ₹1,700.65. The rally was triggered after Motilal Oswal Financial Services initiated coverage on the stock with a 'Buy' rating. The brokerage set a target price of ₹2,000 per share, suggesting a potential upside of approximately 25% from its current trading levels. The positive outlook is based on Midwest's dominant position in the premium black granite market and its strategic transition into a diversified, high-growth materials business.

The Catalyst: A Bullish Brokerage Report

Motilal Oswal's initiation note highlighted Midwest as a compelling investment opportunity, citing its leadership in granite and its expansion into high-value verticals like quartz and heavy mineral sands. The brokerage believes the company's robust cash flows from its core operations provide a solid foundation to fund these new growth engines with minimal strain on its balance sheet. By midday, Midwest's stock was trading 4.06% higher at ₹1,692.05, outperforming the broader market, as the BSE Sensex was down 0.38%.

Granite Business: The Cash-Generating Core

Midwest stands as India's largest producer and exporter of premium Black Galaxy Granite, commanding a significant market share of over 60% of the country's granite exports. The company also holds a leading position in Absolute Black Granite. Its vertically integrated model, which includes the operation of 20 mines, provides substantial scale advantages and cost efficiencies. In the financial year 2025, Midwest reported revenue of around ₹630 crore, achieving a five-year revenue compound annual growth rate (CAGR) of over 21%. Profitability has been a key strength, with EBITDA margins at 27.4% and a five-year EBITDA CAGR exceeding 44%, placing it ahead of most industry peers. This near-monopoly in specific granite types serves as a stable and reliable source of cash flow.

Operational Strength and Expansion

Operationally, Midwest produced approximately 105,000 cubic metres of granite in FY25. The company is developing two additional mines for Black Galaxy and Absolute Black granite to enhance long-term resource security. Its cluster-based acquisition strategy, which focuses on acquiring mines near existing assets, helps improve extraction efficiency and reduce operational risks. Motilal Oswal projects that Midwest's granite revenue and EBIT will grow at a steady 12% CAGR between FY25 and FY28, driven by increased volumes and better sales realisation.

Diversification into High-Growth Verticals

Beyond its core granite business, Midwest is actively scaling two new verticals expected to drive future growth. The first is high-purity quartz grits and powder. The company has already commissioned a 303 ktpa processing plant in Vizag SEZ, which became operational in September 2025. With proven reserves of 2.1 million tonnes, Midwest plans a phase-II expansion to double its capacity to around 606 ktpa, funded by a capital outlay of ₹130 crore. This venture targets the growing domestic demand for high-purity quartz in sectors like semiconductors and solar modules, which is expected to grow at a 25% CAGR.

Foray into Heavy Mineral Sands

The second area of diversification is heavy mineral sands (HMS). Midwest has secured four mining leases in Sri Lanka for minerals such as ilmenite, rutile, and zircon, which are key feedstocks for titanium dioxide. With exploration approved by Sri Lankan authorities, operations are anticipated to commence by the end of FY27, pending environmental clearances. These new businesses are projected to significantly alter Midwest's revenue mix, reducing granite's contribution from nearly 98% in FY25 to about 50% by FY28, thereby mitigating concentration risk.

Financial Projections and Growth Outlook

Motilal Oswal's report projects an accelerated growth trajectory for Midwest, fueled by its new business segments. While the granite business is expected to grow at a 12% CAGR, the consolidated revenue and EBITDA are forecasted to rise at a much faster 36% and 47% CAGR, respectively, over FY25-28. Adjusted Profit After Tax (PAT) is estimated to grow at a remarkable 56% CAGR during the same period.

Balance Sheet and Valuation

The company's financial health is also improving. Net debt stood at ₹220 crore in FY25, with a Net Debt-to-EBITDA ratio of 1.3x. This ratio is expected to fall below 1x as profits from new operations materialize. By FY27-28, operating cash flows are projected to exceed ₹200 crore annually, turning free cash flow structurally positive. This will support further deleveraging and expansion. Motilal Oswal valued the company at 13x FY28E EV/EBITDA to arrive at its ₹2,000 target price. In a bull case scenario, the brokerage sees a potential target of ₹2,500, implying a 54% upside.

Conclusion

Midwest presents a unique investment case, combining a stable, cash-rich core business with high-growth diversification ventures. The 'Buy' rating from Motilal Oswal reflects confidence in the company's strategy to leverage its granite leadership to fund its expansion into quartz and heavy mineral sands. While risks such as export concentration and execution delays exist, the potential for a significant re-rating driven by successful diversification makes Midwest a stock to watch in the materials sector.