Hold Kajaria Ceramics; target of Rs 1438: ICICI Securities

ICICI Securities research report on Kajaria Ceramics

Kajaria Ceramics (KJC) reported in-line Q3FY24 consol. revenue growth of 5.6% YoY to INR 11.5bn, driven by modest tiles volume growth of 6.4% YoY (4-year CAGR of 7.3%), while realisation declined 3.3% YoY (-1% QoQ). EBITDA margin expanded 333bps YoY (-50bps QoQ) to 15.5% on a low base as RM costs (including power & fuel cost) declined 470bps YoY (+97bps QoQ), resulting in EBITDA/APAT growth of 34.3%/40.2% YoY. As per management, demand was subdued in Q3FY24 and continues to be so even in Jan’24. It expects better volume growth in FY25 on the back of completion in real estate projects that were launched earlier.

Outlook

Management guided for tepid volume growth of 6-7% YoY in Q4FY24 and for FY25 it targets to grow 5-6% above industry growth with OPM of 15-17%. We cut our EBITDA estimates by ~4%/2% for FY24–26 and downgrade KJC to HOLD (from BUY), due to limited upside with a rolled-over Mar’25 TP of INR 1,438 (from INR 1,454), set at an unchanged 38x P/E.