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Demand Recovery and Capacity Expansion Drive Growth

KJC has guided double digit volume growth for 9MFY27 with the EBITDA margin of 18-19% for FY27. The company has announced two brownfield expansions at Srikalahasti (10 MSM) and Gailpur (11 MSM). Exports were impacted by the Middle East geopolitical crisis and elevated freight costs, reducing the monthly export run-rate to ~INR 1.0bn in Q1FY27. We have considered 4.0% CAGR in tiles volume over FY26-28E with cons. EBITDA margin of 17.8% in FY28. We expect Revenue/EBITDA/PAT CAGR of 9.5%/9.2%/16.0% over FY26-28E. We had upward revised our earnings estimates for FY27/FY28 by 5.6%/2.9%, while upgrading our rating to ‘BUY’ from ‘Accumulate’ due to correction in the stock prices. We value the stock at 34x Mar’28E EPS to arrive at revised TP of INR 1,403 (earlier INR 1,338). Upgrade to ‘BUY.’

Q1FY27 financial performance:

Revenues grew by 20.4% YoY to INR 13.3bn (PLe: INR12.7bn). Gross margins remained flat at 59.9 (PLe: 59.5%). EBITDA grew by 39.3% YoY to INR2.6bn (PLe: INR2.3bn). EBITDA margins expanded by ~270bps YoY to 19.6% (PLe: 17.8%). PBT grew by 52.1% YoY to INR2.3bn (PLe: IN`R1.9bn). PAT grew by 52.6% YoY to INR 1.7bn (PLe: INR1.4bn).

Segmental Overview:

Tiles segment revenue grew 17.8% YoY to INR 11.6bn (contributes 87% revenue) with volume growth of 6.0% YoY (PLe: 5.5%), Own manufacturing tiles (contributes 47.5% revenue) revenue grew by 16% to INR6.3bn and its sales volume grew by 5.8% at 15.6MSM. Subsidiaries Tiles (contribute 18.2% rev.) revenue grew by 18% YoY to INR2.4bn and its sales volume grew by 5.9% YoY to 6.1MSM. Outsourcing Tiles (contribute 21.8% rev.) revenue grew by 21.6% YoY to INR2.9bn and its sales volume grew by 6.3% to 7.1MSM. Sanitaryware/Faucet (contribute 9.1% rev.) grew by 32.8% YoY to INR 1.2bn. Adhesives grew by 80.8% YoY to INR451mn.

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