KAJARIA CERAMICS LIMITED

Kajaria Ceramics Limited - Q2 FY19 Result Update

Company Profile RATING: BUY
Target: 494
Kajaria Ceramics Limited (KCL) is the largest manufacturer of ceramic/vitrified tiles in India Upside: 29%
and the 9th largest in the world. KCL has an annual capacity of 68 million square meter CMP : 381.75 ( As on 26/10/2018)
MSM) presently, distributed across seven plants - one in Sikandrabad (UP), one in Gailpur Reuter Code : KAJR.NS
(Rajasthan), one in Malootana (Rajasthan), three in Morbi (Gujarat) and one in Vijaywada Bloomberg Code : KJC:IN
(AP). The company’s manufacturing units are equipped with cutting edge modern technology.
In-tense automation, robotic car application and a zero chance for human error are few rea-
sons for Kajaria to be the number 1 player in Indian industry. Market Data
Face Value (INR) 1.0
Equity Share Capital (cr) 15.9
Q2FY19 result was inline with our expectation; reported healthy volume growth, EBITDA &
Share Outstanding (cr) 15.9
PAT saw marginal improvement QoQ basis
Market Cap (INR cr) 6,082.5

KCL’s topline increased by 8.06% YoY to INR 725.31crore in Q2FY19 on the back of 10.5% Book Value / share 84.8
Daily Avj. Volume 2,98,392
rise in tile volume to 19.54 MSM during the quarter. The company’s net sales from Own
52 W High 764.9
Manufacturing segment rose by 11.93% to INR 430.17 crore in Q2FY19 on yearly basis. Its
52 W Low 310.0
net sales from JVs increased by 0.99% YoY to INR 158.32 crore in Q2FY19. KCL’s Sanitary
Shareholding %
Wears/Faucets segment revenue also rose by 31.48% YoY to INR 43.48 crore in Q2FY19.
Promoter 47.6
However, the company’s Outsource/Imports segment revenue decreased by 3.85% YoY to
Foreign 24.3
INR 93.33 crore in Q2FY19.
Institutions 9.7

KCL’s EBITDA declined by 7.84% YoY to INR 113.5 crore in Q2FY19. The company’s Public & Others 18.4

EBITDA margin contracted by 270 basis points to 15.65% YoY in Q2FY19 due to rise in gas
Sensex and Stock Movement
prices. Its power & fuel expenses saw 35% YoY rise in Q2FY19. KCL’s PAT declined by
11.1% YoY to INR 50.63 crore in Q2FY19.

KCL has successfully cut down its debt by INR 40.90 crore to INR 94.19 crore in Q2FY19
from INR 135.09 crore in Q4FY18. The company has divested its entire 51% stake in Soriso
Ceramic Pvt. Ltd. with loss of INR 3.41 crore in Q2FY19. It has acquired additional 30%
stake from Kajaria Floera Pvt. Ltd making it an wholly owned subsidiary.

Valuation

KCL is the largest tile player in India with 8.7% market share, it enjoys market share of 21.9%
in the organised tile industry (FY17) in value terms. We expect KCL would be a prime benefi-
ciary of the market shift from unorganised to organised segment with GST implementation
due to reducing price difference. At current levels, KCL is trading at P/E of 28.2 FY19E and
23.0 FY20E. We have reduced our target price to INR 494 from INR 623, valuing the stock
at P/E of 30x FY20E (15% discount to Last 5 years average P/E of 35x) implying an upside of
29%.

Financials : (Consolidated) (In INR Cr.)

Dinesh Gupta
FY 2016 FY 2017 FY 2018 FY 2019E FY 2020E +91 22 30272867
Net Sales 2,413 2,550 2,711 2,908 3,290
dinesh.gupta@dalmiasec.com
EBDITA 468 512 467 436 497
Lohit Bharambe
PAT 236 254 229 214 262
+91 22 30272866
EPS (INR) 14.5 15.9 14.7 13.5 16.5
P/E (x) 66.2 36.8 38.8 28.2 23.0 lohit.bharambe@dalmiasec.com

Source - DSPL Research, Company

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KAJARIA CERAMICS LIMITED

Source - Company, DSPL Research

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KAJARIA CERAMICS LIMITED

Result Update – Consolidated (in INR Cr.)

Source - DSPL Research

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KAJARIA CERAMICS LIMITED

Financials - Consolidated (in INR Cr.)

Profit & Loss Statement FY2018 FY2019E FY2020E B alance Sheet FY 2018 FY 2019E FY 2020E
Share Capital 16 16 16
Net Sales 2,711 2,908 3,290
Reserves and Surplus 1,335 1,473 1,639
Raw Material Cost 1,060 1,091 1,227
Shareho lders Fund 1,351 1,489 1,655
Gross Profit 1,650 1,818 2,063 Minority Interest 66 66 66
Employee Cost 318 334 385 Total Loan 135 85 -
Other Manufacturing Cost 876 1,061 1,198 Deferred Tax Liailities 110 110 110
Operating EBITDA 456 422 480 To tal Liabilities 1,662 1,750 1,831
Op. EBITDA Margin (%) 16.8% 14.5% 14.6% Net Fix ed As s ets 1,134 1,207 1,210
Other Income 11 15 16 C apital w o rk in Pro gres s 18 18 18
89 92 97 Deferred Tax Assets - - -
Deperication
Goodwill 11 11 11
EBIT 379 344 400
Inves tments 0 25 100
EBIT Margin 14.0% 11.8% 12.2% 451 438 496
Sundry Debtors
Finance Cost 24 15 - Cash & Bank 82 66 41
Exceptional Item 1 - - Loans & Advances 24 29 33
PBT 355 329 400 Inventories 378 398 451
Tax 127 115 138 Other Current Assets 41 63 71
PAT 229 214 262 To tal C urrent As s ets 977 995 1,091
Sundry Creditors 258 255 315
Provision 18 29 33
Share O/S (in cr) 15.9 15.9 15.9
Other Current Liabilities 203 222 250
Basic EPS (INR) 15 13 16
To tal C urrent liabilities & Pro vis io n 478 506 599
Diluted EPS (INR) 15 13 16 Net As s ets 499 489 492
Cash EPS (INR) 20 19 23 To tal As s ets 1,662 1,750 1,831

C as hfl o w Statement FY 2018 FY 2019E FY 2020E Rati o s Anal y s i s FY 2 0 1 8 FY 2 0 1 9 E FY 2 0 2 0 E

PB T 355 329 400 Per Shar e V al ue
Depreciation & Amortization 89 92 97 EPS (Rs) 14.7 13.5 16.5
Finance Cost 24 15 - BVPS (Rs) 84.8 93.7 104.1
Others (1) - - DPS (Rs) 3.0 4.0 5.0
(Incr)/Decr in Working Capital (101) (6) (29) Tur no ver Rati o
(128) (115) (138) Inventory Days 51 49 47
Tax Paid
238 315 330 Debtors Days 53 56 52
C as h Fl o w fr o m O per ati ng
Creditors Days 35 32 32
(Incr)/ Decr in Gross PP&E (153) (165) (100)
Cash Conversion Cycle 68 72 67
Others 16 (25) (75)
Asset Turnover Ratio 1.3 1.3 1.4
C as h Fl o w fr o m Inves ti ng (137) (190) (175)
Pr o fi tabi l i y Rati o
(Decr)/Incr in Share Capital 1 - -
EBITDA Margin 17.2% 15.0% 15.1%
(Decr)/Incr in Debt 8 (50) (85)
PAT margin 8.4% 7.4% 8.0%
Interest Paid (24) (15) -
ROA 10.7% 9.5% 10.8%
Others (9) - - 16.9% 14.4% 15.8%
ROE
Dividend Paid (47) (76) (95) ROCE 15.8% 13.6% 14.8%
C as h Fl o w fr o m Fi nanci ng (72) (141) (180) So l vency Rati o
Exceptional Items - - - Debt / Equity Ratio 0.1 0.1 -
Incr/(Decr) in Balance Sheet Cash 30 (16) (25) Current Ratio 1.7 1.7 1.8
O peni ng C as h and cas h eq. 50 82 66 Quick Ratio 1.0 1.0 1.0
C l o s i ng C as h and cas h eq. 80 66 41 Interest Coverage Ratio 19.4 29.3 -
Other Bank Balance 3 - - V al uati o n Rati o s
To tal C as h and cas h eq. 82 66 41 PE (x) 38.8 28.2 23.0
P/B (x) 6.8 4.1 3.6
EV/EBITDA (x) 19.6 13.8 11.9
Mcap/Sales (x) 3.4 2.1 1.8
Earning Yield (%) 2.6% 3.5% 4.3%
Dividend Yield (%) 0.5% 1.1% 1.3%
Free Cash Flow Yield (%) 0.8% 2.2% 3.8%

Source - DSPL Research

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DISCLOSURE

Investment
Expected return (Over 1 year)
Rating Trading Rating Expected return (less than1 year)
Buy > 15%
Buy > 5%
Hold > -10% to 15%
Sell < -10% Hold > -5% to 5%
We have forward looking estimates for the stock but we refrain Sell < - 5%
Not Rated
from assigning recommendation

The definition of the terms used in making recommendations are available at http://www.dalmiasec.com/Pdf/Abbreviation.pdf. These terms have been consistently used throughout the Re-
search Reports contained herein.

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