IDBI Capital has downgraded Kajaria Ceramics (Kajaria) to 'HOLD' from 'BUY' with a revised target price of Rs 977 (earlier Rs 910).

Kajaria Q4FY21 result was in-line with our estimates on key parameters. Strong demand recovery boosted sales volume and resulted in highest ever net sales for Kajaria. Further, EBITDA margins improved with higher plant efficiency, better performance from subsidiaries & higher capacity utilization. Net sales increased by 46.1% YoY to Rs 9,525 million, while EBITDA came in at Rs 1,909 million, up by 104.5% YoY. The company reported net profit of Rs 1,312 million, a robust growth of 166.5% over Q4FY20.

Commenting on the result review, the broking firm said, "After a strong demand recovery in H2FY21, second wave of Covid-19 has played a spoil sport and demand took a hit amid statewide lockdowns. The management remained cautious and refrained from giving any volume growth guidance for FY22E.

We have marginally increased our net sales/PAT estimates for FY22E/FY23E. After a sharp run up in the stock price, value looks priced in at current level. We downgrade the stock to HOLD (from BUY) with a revised TP of Rs 977 (earlier Rs 910), assigning 35x PER on FY23E."

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