Maintain BUY on Kajaria Ceramics - Performance shines through; outlook bright - HDFC Securities

Kajaria Ceramics (KJC) reported good performance in Q4FY21 as its consolidated net sales/EBITDA/APAT rose 14/5/7% QoQ (46/105/156% YoY) to INR 9.53/1.91/1.27bn respectively. It reported QoQ volume/revenue growth across all three business segments - tiles, bathware, and plywood. Strong cost controls and price hikes moderated the impact of surge in gas, copper and packing costs, leading to a strong 20% EBITDAM. KJC remains upbeat on demand prospects and has announced 18% tiles capacity increase (to come into effect by end FY22E) to ride the domestic growth. The company will continue to ramp up its bathware and plywood revenues. We continue to like KJC for its leadership in tiles and robust growth and margin outlook. We maintain our BUY rating and a revised TP of INR 1,104/share (19x its consolidated Mar'23E EBITDA).

Strong traction continues: KJC's revenue continued to accelerate across all three business segments: tiles (+14/45% QoQ/YoY), bathware (6/73%) and plywood (20/165%), riding on strong tiles demand and sales ramp-up (mainly in non-tiles). Healthy demand supported price hikes to largely pass on QoQ cost inflation (gas, copper, and packaging) and, hence, KJC's EBITDAM remained strong at 20% (vs 14/22% YoY/QoQ). Thus, consolidated revenue/EBITDA/APAT rose 14/5/7% QoQ (46/105/156% YoY on a low base).

Outlook: KJC is upbeat on demand and has announced tiles capacity expansion across ceramics (15%), PVT (22%) and GVT (17%) (which would come into effect by end FY22), incurring a Capex of INR 2.7bn for the same. It plans to accelerate the addition of exclusive dealers to gain market share. KJC also expects its bathware and plywood segments to grow at a strong pace (on a low base), which would accelerate its revenue to 25% CAGR over FY21-23E. We trim our EBITDA estimate for FY22E by 3%, factoring in low sales in 1QFY22 (COVID second wave impact) but increase FY23E EBITDA estimate by 10%, building in higher volume from upcoming expansion.

Shares of KAJARIA CERAMICS LTD. was last trading in BSE at Rs.1000.9 as compared to the previous close of Rs. 1016.35. The total number of shares traded during the day was 13759 in over 1555 trades.

The stock hit an intraday high of Rs. 1035.9 and intraday low of 991. The net turnover during the day was Rs. 13808961.

Source : Equity Bulls

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