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Cholamandalam Securities
Kajaria Ceramics (Outperformer)
CMP: ₹621.55
Target: ₹690
Kajaria Ceramics is the largest tile manufacturer in India, with a 63.9 million square metres (msm) annual capacity (25.6 msm ceramic tile, 30.4 msm polished vitrified tiles and 9.3 msm glazed vitrified tile).
Net sales (including other operating income) was up 4.9 per cent y-o-y to ₹700 crore. Volume growth was affected due to GST-led disruption, while management has highlighted that the channel restocking is gaining momentum and reiterated a double digit volume growth for FY18.
During the quarter, volume grew 3.2 per cent y-o-y to 16.37 msm and realisation increased by 2.6 per cent y-o-y to ₹369.1/ square metre. Revenue from sanitaryware/ faucet grew 10.6 per cent y-o-y to ₹23.4 crore.
Valuation: We are positive on the long-term prospects of the company given its leadership position and execution capabilities, in addition to this, the favourable long-term demand drivers such as declining interest rate cycle, normal monsoon, GST and 7th Pay Commission are likely to spur demand.
Risks: Sharp increase in power and fuel cost. Prolonged slowdown in the construction activity or increase in interest rate could adversely affect the tile demand.
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