Comments
Target: ₹1,450
CMP: ₹1,275.95
Kajaria Ceramics has, over the years, solidified its presence as the primary pan-India tiles player, selling over 100msm in volume (industry size: about 2,070msm) in a highly competitive & fragmented market. Kajaria’s leadership position, strong brand salience, and large distribution network have helped it gain market share in the last decade (revenue CAGR: 10 per cent, 300bps above industry).
We expect market-share gains to sustain, with nearly doubling of capex intensity in FY23-26E (average spend: ₹3 bnpa) vs. the past 5 years. Besides, Company focus is on value-added projects for improving margins/return ratios in coming years. We bake-in revenue/PAT CAGR of 13/19 per cent over FY24-26.
Higher growth, better return ratios (over 15 per cent), and a healthy balance sheet have resulted in premium valuations, though current valuations adequately reflect the strong outlook for earnings. Kajaria, given its net cash balance sheet (BS) and superior brand, is a solid play in the tiles sector, with expanding reach to tier 2/3 cities.
Accordingly, we initiate coverage on Kajaria Ceramics with Add and TP of ₹1,450/share, based on FY26E 37x P/E. Any correction in stock price should be considered an opportunity to accumulate.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.