Result Update: Kajaria Ceramics Ltd - ACCUMULATE - TP Rs.757 - Kotak

- Revenues for Q4FY17 were ahead of our estimates and sales have started reviving back post demonetization. Operating margins were under pressure due to higher operational costs. Net profit came ahead of our estimates due to better than expected revenues. Gas prices have also moved up during the quarter but impact of higher gas prices was restricted to some extent by rupee appreciation. We believe that company would continue to gain on market share due to its enhanced presence in Tier 2/3/4 cities as well as enhanced dealer network. Introduction of value added products, GST implementation, improvement in capacity utilization as well as increased presence in different cities are expected to aid revenue growth going forward.

- We introduce FY19 estimates and roll forward our valuations to FY19. We arrive at a revised price target of Rs 757 based on 30x FY19 estimated earnings as against Rs 627 earlier based on 28x FY18 estimates. We had earlier reduced our valuation multiple downwards (from 30x to 28x in Dec, 2016) to factor in the impact of demonetization. With sales returning to normalcy and innovation and brand promotion initiatives will help the company to remain a market leader and hence stock will trade at higher valuation multiples. Owing to limited upside from current levels, we maintain ACCUMULATE rating on the stock. We would advise investors to look for better entry points to enter into the stock.

Shares of KAJARIA CERAMICS LTD. was last trading in BSE at Rs.690.25 as compared to the previous close of Rs. 695.65. The total number of shares traded during the day was 10243 in over 477 trades.

The stock hit an intraday high of Rs. 702.55 and intraday low of 679.75. The net turnover during the day was Rs. 7084383.

Source : Equity Bulls

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