Kotak Securities
Kajaria Ceramics (Buy)
CMP: ₹465.30
Target: ₹533
We recently interacted with the management of Kajaria Ceramics to understand the impact of demonetisation on the company. We believe that sales in the cash segment from the dealer to the end users have been impacted due to lack of demand as well as liquidity.
Overall sales are expected to be impacted adversely by 20-25 per cent based on our interactions with the company management as well as industry participants. Along with this, prolonged slowdown in real estate and delays in GST implementation may also impact the sales growth of the company.
However, with demonetisation, cash-based players in Morbi have been impacted badly and are forced to shut shops. Organised players are likely to benefit from this shift in the demand which would augur well for revenue growth going forward. We revise our estimates downwards to factor in the impact of demonetisation and slow demand and arrive at a revised price target of ₹533 (₹708 earlier).
We believe that Kajaria Ceramics, being the leader in the industry, is ideally positioned to benefit from incremental demand once it starts reviving.
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