Buy Kajaria Ceramics; target of Rs 1454: ICICI Securities

ICICI Securities research report on Kajaria Ceramics

In Q2FY24, Kajaria Ceramics (KJC) reported in-line consol. revenue growth of 4.1% YoY driven by tiles volume growth of 6.3% YoY (4-year CAGR of 7.6%), while realisation declined 3.4% YoY (-1.2% QoQ). EBITDA margin expanded 402bps YoY (+12bps QoQ) to 16% on a low base due to lower RM cost (-616bps /-197bps YoY/QoQ, including power and fuel cost), resulting in EBITDA/APAT growth of 38.9%/48.9% YoY. As per management, demand was subdued in Q2FY24, but it remains optimistic of better volume growth in H2FY24 driven by an uptick in the real estate sector. Management guides for volume growth of 9–10% YoY (vs. 13–15% YoY earlier) and maintains its margin guidance of 14–16% with an upward bias in FY24.

Outlook

We cut our EBITDA estimates by ~4% each for FY24–26E and upgrade our rating from ADD to BUY with a rolled-over Dec’24E TP of INR 1,454 (from INR 1,487), set at an unchanged 38x P/E.