Hold Kajaria Ceramics; target of Rs 1192: Prabhudas Lilladher

Prabhudas Lilladher's research report on Kajaria Ceramics

The management has refrained from providing guidance due to prevailing low demand conditions but expects to outperform the industry in FY26. KJC expects decent growth in Bathware and Adhesives segment in FY26 and gradual pick up in domestic volumes as exports is expected to reach to FY24 levels. We have considered 4.8% CAGR in tiles volume over FY25-27E with cons. EBITDA margin of 16.0% in FY27. Management indicated gradual pick-up in FY26 volumes, revival in exports due to lower freight rates, and expected improvement in margins, as the company works on cost rationalization and exits the low-margin plywood business. "KJC expects healthy earnings growth driven by margin expansion, though volume growth is likely to remain challenging. We expect Revenue/EBITDA/PAT CAGR of 6.6%/16.1%/24.0% over FY25-27E. Downgrade to HOLD.

Outlook

We have revised our FY26/27 earnings estimates upward by 18.0%/13.1% mainly with improvement in margins on account of cost saving with distribution consolidation, integration of tiles divisions and the discontinuation of low margin tiles. We had downgraded our rating to ‘HOLD’ from ‘Accumulate’, we value the stock at 36x FY27E EPS to arrive at revised TP of Rs1,192 (earlier Rs 1,171).

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