Earnings Update - Kajaria Ceramics (KJC IN) -Revenue growth led by volume - CSEC Research

Revenue growth led by volume

- Consolidated net sales of the company grew by 9.3% YoY to INR 7.19bn. Total volume grew ~11% YoY to 19.32 MSM in 4QFY17, while realization declined by 2.9% YoY to INR 354 per square meter. Revenue from Sanitaryware / faucet was robust and has grown by ~56% YoY in 4QFY17 (51% in FY17).

- Own manufacturing volumes grew by 10.9% YoY to 10.52msm, JV volumes de-grew 6.8% YoY to 6.06msm and outsourced / import volumes grew by 90% YoY to 2.74msm. In 4QFY17, Production fell by 4% YoY to 15.51msm (Own: +5.7% YoY and JV: -16.9% YoY).

- EBITDA margin fell by 220bps YoY to 18.2% on account of higher fuel cost and advertising expenses. APAT grew by 2.6% YoY to INR 708mn in 4QFY17. In 4QFY17, D/E stood at 0.17X and working capital days at 46 and RoE of 22.15%.

Valuation: We are positive on the long term prospects of the company given its leadership position and execution capabilities, in addition to this, the favorable long term demand drivers such as declining interest rate cycle, normal monsoon, GST and 7th pay commission are likely to spur demand. At CMP of INR 685, the stock is trading at 33.3XFY18E and 27.7X FY19E earnings. We assign an OUTPERFORMER rating on the stock with a revised target price of INR 756 (earlier INR 684) based on a target P/E of 30XFY19EPS.

Risks: Sharp increase in power & fuel cost. A prolonged slowdown in the construction activity or increase in interest rate could adversely affect the tile demand.

Shares of KAJARIA CERAMICS LTD. was last trading in BSE at Rs.675.95 as compared to the previous close of Rs. 688.25. The total number of shares traded during the day was 57197 in over 2511 trades.

The stock hit an intraday high of Rs. 725 and intraday low of 671.3. The net turnover during the day was Rs. 39715263.

Source : Equity Bulls

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