Buy Kajaria Ceramics - Dolat Capital

We are positive on the business prospects of Kajaria Ceramics due to its leadership position in the ceramic tiles Industry backed by complete range of products, superior design capability, high brand recall and a loyal and strong dealer network. Our interactions with various manufacturers and intermediaries confirm our belief in Kajaria.

The demand drivers of the tile Industry continue to be robust and we expect industry growth of 15% CAGR over the next few years. Chinese imports are no longer a threat except in small pockets, as anti dumping duty and other factors have made them unattractive.

We expect the top line and bottom line to grow at a CAGR of 22% & 30% respectively over the next couple of year while the ROE is expected to remain strong at 31.8% (FY12 at 31.5%). At CMP of Rs. 174, the stock trades at 12x & 9.3x its FY13E & FY14E earnings of Rs. 14.5 & Rs. 18.7 respectively. We recommend Buy with a target price of Rs. 224 (12x FY14E EPS).

Source : Equity Bulls

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