Buy Kajaria Ceramics; target of Rs 1224: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Kajaria Ceramics has recommended buy rating on the stock with a target price of Rs 1224 in its research report dated February 05, 2025.

Broker Research

February 05, 2025 / 13:35 IST

Buy

26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Kajaria Ceramics

We downward revise our FY25/FY26/FY27 earnings estimates by 11.8%/9.4%/9.4% factoring in contraction in EBITDA margins and lower volume growth guidance of 8-9% in the tiles segment. Additionally, muted demand in the bathware segment, primarily driven by weak retail business performance, has also influenced our outlook. KJC is expected margin of 14-15% in FY26. However, in Q3FY25, margins were impacted by losses in the bathware segment, higher employee expenses, and lower realizations in the tiles segment. KJC is expecting a revival in demand, driven by an anticipated rate cut by the RBI and an expected increase in disposable income due to the restructured personal income tax regime in the FY26 Union Budget. KJC has increased its stake in the Nepal JV from 50% to 51%, with current capacity utilization at 70%, expected to rise to 80-85% and its number will be consolidated in FY26. We have considered ~8.8% CAGR in tiles volume over FY24-27 with cons. EBITDA margin of 15.2% in FY27. Management has indicated that volume growth will gradually pick up in FY26, driven by initiatives such as 1) increase in dealer penetration & showrooms, 2) enhanced brand building, 3) expansion in product portfolio, 4) intensify focus on projects business, and 6) improved business efficiency.

Outlook

We expect Revenue/EBITDA/PAT CAGR of 8.5%/8.2%/9.7% over FY24-27E. Maintain ‘BUY’ rating, as we value the stock at 35x FY27 (revised target multiple from 40x to 35x on soft guidance and weak demand scenario) EPS to arrive at revised TP of Rs1,224 (earlier Rs 1,545).

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