Accumulate Kajaria Ceramics; target of Rs 1445: Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Kajaria Ceramics with a target price of Rs 1445 in its research report dated January 01, 2024.

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February 06, 2024 / 15:49 IST

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Prabhudas Lilladher's research report on Kajaria Ceramics

We downward revise our FY24 estimates by 5.3% to factor in lower volume growth of 6.4% YoY and margin contracted to 15.5% (-50bps QoQ). Kajaria Ceramics (KJC) guided volume growth of 6-7% in Q4FY24 (9MFY24 reported 6.6% YoY) and reduced EBITDA margin guidance to 14-16% (earlier ~16.0%) with recent increase in gas prices & difficulty in pass-on as slowdown in dom. demand. Management indicated gradual pick-up in FY25 volumes and expected improvement in demand environment emanating from rub-off of strong growth in real estate sector to drive better volume growth in FY25. We are cautiously optimistic for long term given 1) its largest player positioning in domestic tiles market, 2) focus on brand building (adv. spends at 3% sales), 3) expanding distribution network, 4) controlled fuel expenses, and 5) exponential growth in Bathware/Plywood/Adhesive businesses.

Outlook

We expect Revenue/EBITDA/PAT CAGR of 11.9%/19.6%/23.7% over FY23-26E and downward revise our FY25E/FY26E earnings estimate by 2.9%/1.4%. Maintain ‘Accumulate’ rating, as we value the stock at 35x FY26 EPS to arrive at revised TP of Rs1,445 (earlier Rs 1,415).

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