Buy Kajaria Ceramics; target of Rs 1600: Motilal Oswal

Motilal Oswal is bullish on Kajaria Ceramics recommended buy rating on the stock with a target price of Rs 1600 in its research report dated January 31, 2024.

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February 07, 2024 / 18:38 IST

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Motilal Oswal's research report on Kajaria Ceramics

Kajaria Ceramics (KJC) reported consolidated revenue/EBITDA growth of 6%/ 34% YoY to INR11.5b/INR1.8b (in line) in 3QFY24. OPM stood at 15.5% (vs. est. 15.7%). PAT came in at INR1.0b (vs. est. INR1.1b). The management remains confident of achieving 5-6pp higher growth than the industry average. Demand should increase as spending have been higher in the infrastructure and real estate sectors for the last 2-3 years. In 4Q, volume growth should be ~7% for KJC. Morbi manufacturers have not hiked prices despite a 17% increase in Gujarat gas prices since Aug’23. Tile prices have come down by 2-3% in the last few months. Average gas price was INR39/scm in 3QFY24. We largely maintain our estimates for FY24-26.

Outlook

We estimate that a ~23% EPS CAGR over FY23-26, strong return ratios (RoE of 22%, ROCE of 26% and RoIC of 31% in FY26E), and a healthy balance sheet will help KJC maintain its premium multiples. We reiterate our BUY rating with a TP of INR1,600, based on 40x FY26E EPS.

For all recommendations report, click here