The shares of the largest manufacturer of ceramic tiles gained up to 1.3 percent after Motilal Oswal, a well-known brokerage recommended a ‘buy’ rating.
With a market capitalization of Rs 18,981.20 crore, the shares of Kajaria Ceramics Ltd closed at Rs 1,191.85 per share, increasing around 0.13 percent as compared to the previous closing price of Rs 1,190.25 apiece.
Looking into Kajaria Ceramics’s performance, revenue increased by 5 percent from Rs 1,091 crore in Q3 FY23 to Rs 1,152 crore in Q3 FY24. During the same period, net profit decreased by 45 percent, from Rs 74 crore to Rs 108 crore.
Motilal Oswal, one of the well-known brokerages in India, gave a ‘Buy’ call on the tiles stock with a target price of Rs 1600, indicating a potential upside of 34 percent from Wednesday’s closing price of Rs 1191.85 per share.
Here is the rationale behind the bullish potential upside target:
● KJC’s tile volume saw a 7% YoY growth in 9MFY24, with an estimated 6% growth in 4QFY24. Strong real estate demand and increased construction activities suggest future improvement. Historical data shows a volume CAGR of 17% during the previous real estate upcycle. Management aims for 5-6pp higher volume growth than the industry.
● In FY24, KJC expanded its tile manufacturing capacity by 6% to 86.47 msm. This expansion included modernization efforts at its Sikandrabad and Galipur plants, resulting in increased capacities to 11.40 million square meters and 40.42 million square meters, respectively, by focusing on larger tile sizes.
● The company is establishing a 5.1msm capacity in Nepal through a joint venture with Ramesh Corp, Nepal. KJC will invest around Rs 900 (total project cost of Rs1.81 billion). The project has been somewhat delayed and is now projected to be operational by June 24.
● Brokerage estimate revenue/EBITDA/PAT CAGR of 11%/17%/20% over FY24-26E. They also estimate KJC’s OPM to improve to 16.9%/17.6% in FY25/FY26 from 15.9% in FY24.
On January 31, 2024, the Board approved an investment of up to ₹ 50 crores to acquire a facility in Morbi (Gujarat) with an annual production capacity of 6 MSM of GVT through a 90% shareholding in KTPL.
Kajaria Ceramics Limited is an Indian maker of ceramic and vitrified tiles. The company’s sectors include tiles and others. The Tiles division manufactures and trades ceramic and vitrified wall and floor tiles. The Others business is engaged in producing sanitary ware and faucets, as well as trading plywood and block board.
Written by:- Abhishek Singh
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