ICICIdirect.com is bullish on Kajaria Ceramics and has recommended buy rating on the stock with a target of Rs 695 in its August 4, 2014 research report.
"Kajaria Ceramics (Kajaria) reported revenue of Rs 503.3 crore (YoY growth of 15.0%) vs. our expectation of Rs 528.2 crore, led by volume growth of 15.8% YoY to 14.1 million square meter (MSM) in Q1FY15 while the realisation was largely flat at Rs 357 per square meter (SM). Margins at 15.9% (improved by 110 bps YoY) were ahead of our estimates of 15.2%. The company reported PAT of Rs 38.6 crore (YoY growth of 49.5%) vs. our estimate of Rs 39.7 crore. The working capital (WC) days improved further to 24 days in Q1FY15 vs. 25 days in FY14 and net debt reduced by Rs 9 crore sequentially to Rs 227 crore (debt to equity: 0.4x)."
"Kajaria is looking to augment its capacity by 7.5 MSM (Cosa - 3 MSM & Jaxx - 4.5 MSM) in August, 2014. Furthermore, it will set up a greenfield and brownfield facility in Rajasthan for production of 5 MSM of polished vitrified tiles and 3 MSM of ceramic tiles, respectively, by FY15E. Additionally, Taurus Tiles Pvt Ltd's (Kajaria – 51% stake) capacity of 5 MSM is anticipated to come on-stream by December, 2014. These expansion, acquisitions are expected to take its capacity from 46.6 MSM currently to 67.1 MSM leading to CAGR of 24.7% and 32.8% in topline and bottomline, respectively, during FY14-16E. Kajaria has outlined ~Rs 350 crore for its planned capacities. We believe Kajaria is comfortably placed to fund its capex, going ahead due to :- i) remaining Rs 75 crore to be received from equity raised from WestBridge, ii) Strong OCF generation (~Rs 500 crore) during FY14-16."
"Going ahead, we remain positive on Kajaria given the sturdy growth in the industry, favourable structural shift towards organised players post the Morbi fuel development, its better margin & return ratio profile coupled with a healthy balance sheet. Hence, we recommend BUY on the stock with a revised target price of Rs 695 (valuing it at 0.8x PEG, implying P/E of 25x FY16E). Overall, we remain optimistic on Kajaria's business prospects in the organised space and believe the robust growth trajectory will continue," says ICICIdirect.com research report.
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