Hold Kajaria Ceramics; target of Rs 150: Sushil Finance

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Hold Kajaria Ceramics; target of Rs 150: Sushil Finance

Sushil Finance has recommended hold rating on Kajaria Ceramics with a target of Rs 150, in its February 8, 2012 research report.

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Sushil Finance has recommended hold rating on Kajaria Ceramics with a target of Rs 150, in its February 8, 2012 research report.

"Kajaria Ceramics Limited (KCL) is the largest manufacturers of ceramic/vitrified tiles in India and has carved out a distinct brand equity in the same. It has a capacity of 30.60 mn sq meter (MSM) (across 3 plants - Sikandrabad in Uttar Pradesh, Gailpur in Rajasthan and Morbi in Gujarat). It has increased its capacity from 1 MSM to 30.60 MSM in last 22 years and offers more than 400 options in ceramic wall & floor tiles, vitrified tiles, designer tiles and much more."

"For the quarter ended 31st Dec, 2011 (Q3FY12). It has posted net sales on standalone basis of Rs.3483.8 mn, registering a growth of 37% YoY. The EBITDA grew by 38% YoY to Rs. 547.7 mn while the EBITDA margins were flattish at 16%. Its PBT (including other income) increased by 18% YoY and APAT stood at Rs. 207.8 mn registering a growth of 18% YoY. Its AEPS for the quarter stood at Rs. 2.8 During 9MFY12 KCL's net sales on standalone basis increased by 39% to Rs. 9353.1 mn. Its EBIDTA increased by 36% at Rs. 1435.2 mn, while the EBIDTA margins decreased by 42 bps to 15.34%. It's Profit before Tax (PBT) including Other Income increased by 35% to Rs. 814.5 mn YoY. Its APAT stood at Rs. 565.1 mn registering a growth of 34% YoY. Its AEPS for 9MFY12 stood at Rs. 7.7. Volume growth for the quarter (Q3FY12) & 9M was 32% & 34% respectively. This was mainly driven by strong domestic demand and improved product mix. Despite of cost pressure, the margins for the quarter were almost flattish mainly due to better product mix and price hikes taken during quarter."

"KCL recently acquired 51% stake in Jaxx Vitrified Pvt. Ltd. based in Gujarat in all cash deal of Rs. 62.65 mn. Jaxx has an annual capacity to produce polished vitrified tiles of 3.10 MSM per annum, the addition of which would take total capacity to 33.70 MSM. This is the 2nd acquisition by KCL in Gujarat. Jaxx has a brand new plant which will start production by February, 2012. This will help KCL to reduce import dependence to cater to the western and southern markets to take logistic advantage."

"KCL has performed exceedingly well in the past few years on the back of rising tiles demand, leveraging its strong brand & distribution network, focus on value added products & consistent expansion in its capacities. Given its strong market positioning, increased capacities of its vitrified tiles, foray into new product lines of high end sanitaryware & wooden flooring segments, we expect KCL to deliver strong growth over the coming years. After incorporating its 9MFY12 numbers, we have increased our Revenues & APAT growth; we now expect its Revenues and APAT to grow strongly by 29.2% & 27% in FY12 and 24% & 43.1% in FY13 respectively. We change our rating to "HOLD" on the stock with an increased price target of Rs 150 (10x FY13E EPS of Rs.15)," says Sushil Finance research report.

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To read the full report click on the attachment