Buy Kajaria Ceramics Ltd For Target Rs.1,716 By Sushil Finance
Kajaria Ceramics Ltd. recently announced its performance for the quarter ended June 30, 2025. Following are the key highlights.
Highlights from the Quarter (Q1 FY26)
Consolidated sales were at Rs.1,103 cr, recording a (1.0%) yoy de-growth. Lower revenue was attributed to the closure of the plywood division and a decline in tiles volume by 2% yoy. From an industry point of view, tile exports from India in FY25 fell ~20% y-o-y to Rs 16,000 cr vs. Rs 20,000 cr in FY24, mainly due to significant jump in ocean freight rates and a lack of container availability, because of the Red Sea crisis. However, with the ceasefire between the two countries in the Middle East, Kajaria expects the exports to rise to Rs.18,000-20,000 cr in FY26. Domestic demand is expected to pick up with the increase in the government expenditure, after the elections in FY25.
The company focused on streamlining of resources and integrated the ceramic, PVT and GVT tile divisions into one, to optimise the sales and marketing resources. There were a few let-offs in the employees and promoters have forgone their entire salary for FY26 (Rs.17 cr in FY25). These measures lead to a sharp increase in the EBITDA margins by 560 bps on qoq to 16.9% in 1QFY26. We expect that the margins are likely to be on the upward trajectory, considering the benign raw material and fuel cost and the measures adopted by the company.
The company’s JV tiles plant in Nepal was formed with the Ramesh Corp, with the capacity of 5.1 MSM for floor and wall tiles. It operated at 69% utilisation levels in Q1FY26. The company is not looking to increase its shareholding to 51% in the Nepal JV in the immediate future.
OUTLOOK AND VALUATION
With the cost optimization measures by the company, we expect the bottomline to grow faster clip, at 19.5% CAGR, with FY27E EPS to be Rs. 31.2 and the PAT margin to be 10%. We arrive at a Target Price of Rs. 1,716, showcasing an upside potential of 44% from current levels with an investment horizon of 18-24 months, with a BUY rating on the stock.
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