Dolat Capital recommended accumulate rating on Kajaria Ceramics with a target price of Rs 416 in its research report dated October 26, 2018.
Dolat Capital's research report on Kajaria Ceramics
Despite multiple headwinds during the quarter sequential improvement in realisation, tile volume growth of 10.5% YoY coupled with gross margin expansion of 649bps YoY helped Kajaria Ceramics post better than expected performance on all fronts. Kajaria Ceramics reported top line of ` 7.25 bn (+8.1% YoY, +10.4% QoQ), 7.9% higher than D’est. Tile segment reported topline growth of 6.8% YoY to ` 6.82bn (+10.4% QoQ) on the back of 10.5% YoY growth in Volumes (+9.0% QoQ), realisation improved sequentially to Rs349/msm (-3.3% YoY, +1.3%QoQ). Volume growth of 10.5% YoY during the quarter driven by 14.0% YoY growth in own manufacturing sales. 1.3% sequential improvement in blended realisation for the tile division driven by 2.9% QoQ growth in own segment realisation & 4.2% improvement in outsource/imported segment. Sanitaryware/Faucets division reported 31.5% YoY growth to ` 435Mn (+9.6% QoQ).
Outlook
We have revised our target price to` 416, with an accumulate rating on the stock valuing Kajaria ceramics at 25x FY20E eps of ` 16.6. At CMP KJC is trading at 25.9x/21.7x FY19E/20E EPS of ` 14.0 & 16.6 respectively.
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