Accumulate Kajaria Ceramics; target of Rs 416: Dolat Capital

Dolat Capital's research report on Kajaria Ceramics

Despite multiple headwinds during the quarter sequential improvement in realisation, tile volume growth of 10.5% YoY coupled with gross margin expansion of 649bps YoY helped Kajaria Ceramics post better than expected performance on all fronts. Kajaria Ceramics reported top line of ` 7.25 bn (+8.1% YoY, +10.4% QoQ), 7.9% higher than D’est. Tile segment reported topline growth of 6.8% YoY to ` 6.82bn (+10.4% QoQ) on the back of 10.5% YoY growth in Volumes (+9.0% QoQ), realisation improved sequentially to Rs349/msm (-3.3% YoY, +1.3%QoQ). Volume growth of 10.5% YoY during the quarter driven by 14.0% YoY growth in own manufacturing sales. 1.3% sequential improvement in blended realisation for the tile division driven by 2.9% QoQ growth in own segment realisation & 4.2% improvement in outsource/imported segment. Sanitaryware/Faucets division reported 31.5% YoY growth to ` 435Mn (+9.6% QoQ).

Outlook

We have revised our target price to` 416, with an accumulate rating on the stock valuing Kajaria ceramics at 25x FY20E eps of ` 16.6. At CMP KJC is trading at 25.9x/21.7x FY19E/20E EPS of ` 14.0 & 16.6 respectively.