Buy Kajaria Ceramics; target of Rs 670: ICICI Direct

ICICI Direct is bullish on Kajaria Ceramics recommended buy rating on the stock with a target price of Rs 670 in its research report dated October 21, 2020.

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November 03, 2020 / 21:44 IST

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ICICI Direct's research report on Kajaria Ceramics

Kajaria Ceramics’ Q2FY21 performance was resilient with sales volumes up 0.3% YoY at 19.8 MSM as blended utilisations went back to 90% coupled with a strong rebound in demand tier II, III cities. The topline was down 0.3% YoY at Rs 712.5 crore, albeit realisations were down 2.4% YoY, as a result of product mix. The company reported EBITDA of Rs 143.7 crore with margins at 20.2%, up 544 bps YoY driven by lower power costs (down 12.4% YoY) on account of subdued gas prices and continued reduction in some overheads. The beat at the operating performance level percolated to PAT wherein it was reported at Rs 89.1 crore, down 4.4% YoY.

Outlook

Kajaria, with a net cash balance sheet and superior brand, is likely to capitalise on market share gain. We raise our earnings estimates by 52% and 41%, respectively, given low cost structure. We upgrade to BUY with a revised target price of Rs 670/share, at 30x FY22E P/E.

For all recommendations report, click here