Buy Kajaria Ceramics; target of Rs 1,700: Sharekhan

Sharekhan is bullish on Kajaria Ceramics has recommended buy rating on the stock with a target price of Rs 1,700 in its research report dated July 23, 2024.

Broker Research

July 26, 2024 / 10:50 IST

Buy

26 Aug, 2025 12:21

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Sharekhan's research report on Kajaria Ceramics

The company expects tile volume growth of 11-12% y-o-y and revenue growth of 8-9% y-o-y for FY2025. The tile industry is expected to grow at 5-6% y-o-y in FY2025. OPM is expected at 15-16%. Tile exports grew by 26% y-o-y to Rs. 20,175 crore in FY2024. For the first two months of FY2025, tile exports stayed flat y-o-y at Rs. 3,350 crore due to a steep rise in global freight rates. During the same period, exports to U.S. grew 16% y-o-y to Rs. 335 despite the imposition of anti-dumping duty. Currently, it is exporting 70,000-80,000 per month to Nepal. The Nepal market is estimated at Rs. 2,500 crore and it targets 10-12% market share. Currently, its dealer network is 50-60, which will be increased to 100 dealers over the next three months.

Outlook

Kajaria is expected to benefit from healthy domestic demand, led by strong demand tailwinds from the realty sector and rising exports over the next 2-3 years. The company targets to grow at higher-than-industry growth rates over the medium term. The company continues to invest in branding, sales and distribution, and scaling up the nontile businesses. We have introduced our FY2027E earnings in this note. We expect Kajaria to report a revenue/operating profit/net profit CAGR of 13%/15%/16% over FY2024-FY2027E. The stock trades at a P/E of 41x/35x its FY2026E/FY2027E earnings. We retain BUY on the stock with a revised PT of Rs. 1,700, rolling forward our valuation to H1FY2027E earnings and considering a healthy earnings growth trajectory over the next three years.

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