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Kajaria Ceramics: CMP: 1319 | Long growth: 17% | C_Year Growth: 5% | 9M_Fy_24 Results Update
(Sales Muted while exports affected due to RedSea Conflicts, Profitability strong due to cooling inflations)
About Company: Kajaria Ceramics is the largest manufacturer of ceramic/vitrified tiles in India and the 7th largest in the world. It has an annual capacity of 81.55 mn. sq. metres presently, distributed across Seven plants. Founded 34 years ago, Kajaria has since then grown stronger with its hard work, innovations and patronage from discerning customers.
History: Sales and Profits 20 years back during the fy_2003 were 239 Cr and 10 Cr. We saw a strong 17% CAGR growth during this period as today Kajaria has reached the sales and profits of 4381 Cr and 346 Cr respectively. Hence invested at that time today's value should be around 400X along with high consistent & growing dividends every year. Today's annual dividend should be 4X of the invested amount. This is the magic long-term wealth in the companies who are able to grow their sales and profits.
9M_Fy_24 Results: Considering the privilege and sustained demand changes in the tile industry, the tile volumes continue to remain muted in quarter three '24 as well. volumes executed a modest year-to year growth of 6%, reaching 27.09 million square meters. Even though Gujarat gas price increased by 17% since August '23, the Morbi manufacturers have not taken any price hike. The consolidated revenue for the 9M_fy24 amounted to INR 3338 crores, indicating a muted 5% increase which shows the muted trend in continuity since the beginning of the year. Bathware segment registered a 16% growth in revenue, plywood revenue increased by 81% during quarter three while Revenue from adhesive grew by 42%. On the export front, India's tile exports have experienced a remarkable 49% growth, reaching more than INR 12,300 crores from April '23 to October '23 compared to INR 8,278 crores in the
same period in the previous year. Kajaria exports have slowed down post October '23, with the issues prevalent in the Suez Canal, leading to uncertainty in the region and sudden spurt in ocean freight. Once the situation eases in the Suez Canal, we hope the growth momentum and pickup. The progress of previously announced Nepal project is slightly delayed due to heavy rainfall in the last quarter. We now anticipate commissioning of 5.1 million square meters of glazed vitrified in ceramic capacity by June '24. Due to colling of inflation the total cost increased just by 2% which helped the Profit margin expansion by 240 basis points. Hence Net Profit shoot up by 39%.
Estimated Fy_25: Despite the existing challenges, we maintained a positive outlook for the tile industries' demand in FY25. Considering the likely rub-off of strong real estate demand to drive improvement in offtake for tiles in financial year '25, we are confident of achieving better than industry growth going forward, driven by extensive and relentless branding and distribution efforts. We may close this year with muted 5% sales growth and 30% profit growth. Hence stock could continue in correction mode. We have been recommending Kajaria ceramics for a long time. Those holding since long can add more during any fall near 876 while those accumulated or did SIP during past correction can book some 10% Profits near2162 in the next 2 years target. We can expect the multiyear rally along with high consistent and growing dividends even in future. We may see Kajaria reach the landmark sales of 5000 Cr next year & another landmark sales of 10000 Cr could be seen in the year fy_2031.
Share Holding: 48% holding is with promoters while 39% holding is with FPI along with MF and Insurance companies. Mirae Asset Mutual Fund added some 11000 shares just in the recent March in their existing portfolio of 79.6 Lakh shares which is around 5% stake.
Disclosure: FOR EDUCATION PURPOSES, DO NOT TREAT AS A RECOMMENDATION
