Hold Kajaria Ceramics; target of Rs 1288: Prabhudas Lilladher

Prabhudas Lilladher's research report on Kajaria Ceramics

We have revised our FY27/28 earnings estimates upward by 0.4%/0.7% 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 maintained our rating to ‘HOLD’ we value the stock at 36x Sep’27E EPS to arrive at revised TP of Rs1,288 (earlier Rs 1,281). 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 5.2% CAGR in tiles volume over FY25-28E with EBITDA margin of 17.0% in FY28. 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 to outperform the sector in volume growth once again through 1) increase outsourcing volume, 2) increase in dealer penetration & showrooms, 3) expansion in product portfolio, 4) intensify focus on govt. projects, and 5) improve business efficiency.

Outlook

We expect Revenue/EBITDA/PAT CAGR of 7.1%/15.7%/21.5% over FY25-28E. Maintained ‘HOLD.’