Kajaria Ceramics Ltd. share price target

Kajaria Ceramics (KJC) posted a below-expected Q2FY20 with revenue down 1.5% YoY (volumes +1.1%, realisations 3.5%).

Kajaria Ceramics (KJC) reported below par performance and was mainly impacted by dismal sales volume. Sales volume (tiles) grew merely by 1% YoY to 19.75msm (our expectation / street expectation was 7.5% / 10%). Revenue declined marginally by 1.5% YoY to Rs7.14bn as against expectations of Rs7.4bn. EBITDA stood at Rs1.05bn (-3.4% YoY and -0.7% QoQ) marginally below our estimates of Rs1.1bn and EBITDA margin stood at 14.7% vs. 15% in last year and 15.1% in 1QFY20. Average realisation for tiles improved sequentially by 1.7% to Rs337/SM mainly led by favourable product mix, while operating cost/tonne deteriorated by 2% QoQ at Rs309/SM due to surge in input costs. PBT stood at Rs807mn (-2.8% YoY and flat QoQ) below our expectations...

After a strong FY19 performance (15% YoY volume growth), beginning of FY20E is on a softer note for Kajaria, owing to demand slowdown. The company reported net sales of Rs 7,000mn (+6.5% YoY) driven by 10% volume growth over Q1FY19. EBITDA came in at Rs 1,060mn (+9.5% YoY). Prudent cost management aided marginal EBITDA margin...

Management cuts volume growth guidance for FY20E Sales volumes grew 9.6% YoY to 19.6 MSM in Q1FY20. The management indicated that the operational environment remains challenging while the overall industry growth is expected to remain muted in FY20E. However, it expects sales volumes to grow strongly on the back of gains in market share amid the industry's transition to gas based plants & stricter e-way bill implementation. The management has, however, cut its sales volume guidance to 12-13% YoY in FY20E (15% growth guided earlier) on the back...

Background: Kajaria Ceramics the largest tile manufacturer in India, with a 68 msm annual capacity (29.47MSM Ceramic tiles, 22.4MSM PVT and 16.5MSM GVT) spread across eight plants; four plants in Morbi, Gujarat with cumulative capacity of 19.57 MSM, one each in Sikandrabad - UP (8.4MSM), Vijayawada - AP (2.9 MSM), Malutana Rajasthan (6.5 MSM) and Gailpur - Rajasthan (31 MSM). Kajaria has a strong distribution network of 1,400 dealers, 5,000 sales points across the country and 34 display centers are located at all the Kajaria's offices. Kajaria is the only tile manufacturer in India to be awarded Superbrand' status which they have retained for the sixth...

Kajaria Ceramics (KJC) posted below-expected Q1FY20 revenue growth of 6.5% YoY, with volumes up 9.6% but realisations down 3.8%.

Sector: Construction Material /Mid-Cap | Earnings Update 4QFY19 Background: Kajaria Ceramics the largest tile manufacturer in India, with a 68 msm annual capacity (29.47MSM Ceramic tiles, 22.4MSM PVT and 16.5MSM GVT) spread across eight plants; four plants in Morbi, Gujarat with cumulative capacity of 19.57 MSM, one each in Sikandrabad - UP (8.4MSM), Vijayawada - AP (2.9 MSM), Malutana Rajasthan (6.5 MSM) and Gailpur - Rajasthan (31 MSM). Kajaria has a strong distribution network of 1,400 dealers, 5,000 sales points across the country and 34 display centers are located at all the Kajaria's offices. Kajaria is the only tile manufacturer in India to be awarded Superbrand' status which they have retained for the sixth...

Management guides 15% volume growth in FY20E Kajaria's sales volumes grew 11.2% YoY to 22.51 MSM in Q4FY19. The volume growth was on account of market share gain despite a tough business environment. The management has guided for 15% YoY volume growth in FY20E with continuous gain in market share following strict implementation of e-way bill and ban on coal gasifier. Kajaria is looking to increase its market share from 10% to 14% over the next four years. Currently, Kajaria has capacity of 68 MSM and is setting up 5 MSM GVT plant...

KJC has increased its dealer network from 1,400 to 1,500 and upped the exclusive dealer count from 200 to 240 in FY19. Exclusive dealers contribute ~30% of the company's turnover. Source: Company, BOBCAPS Research...

Our discussions with a few players organized and unorganized indicate that Morbibased tiles manufacturers are planning to implement price hikes in Ceramic (10%+) and Vitrified tiles (5-7%) as they face cost headwinds after the ban on coal gasifier usage. The National Green Tribunal's (NGT) recent order banning the use of coal gasifiers in Morbi (Gujarat) has aggravated the challenges of units based there as they were already facing the issue of increasing receivables days (130-150 days). Our interaction suggests...