Buy Kajaria Ceramics; target of Rs 950: Motilal Oswal

Motilal Oswal's research report on Kajaria Ceramics

Kajaria Ceramics’ (KJC) 4QFY25 EBITDA was below our estimate due to lowerthan-estimated realization and higher-than-estimated other expenses. EBITDA (including discontinued operation) declined ~28% YoY to INR1.7b (~28% miss) and OPM contracted 3.8pp YoY to ~10% (est. ~13%). PAT (incl. discontinued operations) declined ~39% YoY to INR943m (33% miss). Management highlighted that demand was soft in both domestic and exports in 4QFY25. Margin contraction was due to another muted quarter for the Bathware division and a write-off in UK operations (INR70m). It refrained from giving any guidance for FY26 and indicated that it would wait for one more quarter to see a recovery in demand. Further, it is exploring certain measures, including cost optimization, brand strengthening, and reach enhancement, to become more competitive and improve margins.

Outlook

We cut our EPS estimates by ~11%/10% for FY26/FY27 to factor in persistently weak domestic demand and increased competition from Morbi players due to weak exports (down ~20% YoY in FY25). This also led to margin pressure. We value KJC at 35x FY27E EPS to arrive at our revised TP of INR950 (earlier INR1,020). Maintain BUY.