Kajaria Ceramics - Q2FY21 First Cut - ICICI Securities

(CMP - Rs. 576; MCap - Rs. 9,163 crore)

Kajaria Ceramics reported a robust set of numbers as it attained pre-Covid levels volumes (vs. expectation of 15% decline) coupled with continued overheads rationalisation and lower power costs, which led to a beat at the PAT level

Q2FY21 Earnings Summary

- Kajaria's sales volumes were up 0.3% YoY at 19.8 MSM and much better than our estimate of 16.7 MSM (~15% volume decline), as blended utilisations went back to 90% coupled with strong rebound in demand (tier 2/3 cities, in our view)

- The topline was down 0.3% YoY at Rs. 712.5 crore and was higher than our estimates of Rs. 605.8 crore on account of higher-than-expected volume, albeit realisations were down 2.4% YoY, a result of product mix in our view

- The company reported EBITDA of Rs. 143.7 crore (our expectations: EBITDA of Rs. 96.1 crore). The resultant margins at 20.2% were up 544 bps YoY driven by lower power costs (down 12.4% YoY) on account of subdued gas prices and reduction in some of the overheads

- The beat at operating performance percolated to PAT wherein it reported a Rs. 89.1 crore (vs. our expectations of Rs. 55.8 crore) down 4.4% YoY

- Collection during the quarter was strong with working capital down to normalised levels of 50 days vs. 73 days in Q4, coupled with healthy operating cash flow generation. Consequently, net cash improved to Rs. 358 crore (vs. Rs. 182 crore in Q1)

The recovery in sales volume has been much better than anticipated (driven by tier II/III cities in our view) and traction going ahead, will be key. Kajaria with net cash balance sheet and relatively resilient performance given superior brand and leadership is likely to remain a key beneficiary of demand recovery, going ahead. We would review our estimates, rating and target price and will be coming out with the detailed update soon after the conference call.

Shares of KAJARIA CERAMICS LTD. was last trading in BSE at Rs.572.3 as compared to the previous close of Rs. 565.4. The total number of shares traded during the day was 85919 in over 4761 trades.

The stock hit an intraday high of Rs. 583.8 and intraday low of 556.4. The net turnover during the day was Rs. 48920680.

Source : Equity Bulls

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