Kajaria Ceramics (Kajaria) reported healthy 11% sales volume growth to 22.6MSMS. The management attributed this to 100% capacity utilization (except Kosa plant) and robust demand in retail market. It reported another strong quarterly performance, particularly on operating margin front. Robust demand in retail market of from tier-I and smaller cities aided sales volume growth, while opening up of metros further strengthened demand trajectory.
IDBI Capital believes with an all-round Q3FY21 performance, Kajaria has once again proved its leadership position in the domestic tile industry. Net sales increased by 13.1% YoY to Rs 8,383 million, while EBITDA came in at Rs1,818 million, up by 63.3% YoY. The company reported net profit of Rs 1,210 million, a robust growth of 98.8% over Q3FY20. While reiterating healthy volume growth outlook of higher mid-teens, the management has revised EBITDA margin guidance from earlier ~18% to 20% in near future.
Kajaria will remain focused on increasing distribution reach, particularly in smaller untapped markets. To factor in a strong beat on EBITDA and positive management commentary, IDBI Capital increases EBITDA estimate by 20.7%/16%/19.4% over FY21E/FY22E/FY23E respectively. Maintain Buy with a revised TP of Rs 910 (from Rs 670), assigning 35x PER (from 30x) on FY23E.
"Kajaria remains our preferred pick amongst our building material products coverage owing to its scale of operation, balance sheet strength, extensive distribution network and strong brand recall," it added.
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