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Research Report
14th July 2010

BUY
Stock Details

Kajaria ceramics Ltd


Kajaria Ceramics has been in the business of tile manufacturing since 1988. From just one million square meters of tiles per annum, the company's capacity has increased to 23.4 million square metres now. With a pan-India presence, the company also exports its products to 20 nations across the Europe, UAE and Australia. There only a few listed players in the tile industry; organized players have a 40 per cent share of the market. Growing Industry demand The growing demand from the housing segment, new construction in the commercial space, the increasing disposable income of the people, favors the industry's growth. The government's imposition of anti-dumping duty last year on ceramic tiles from China has also given relief to domestic manufacturers. Tiles from China had at one stage threatened domestic manufacturer's prospects with their price advantage. Excellent growth to drive the value Kajaria Ceramics' sales have grown at a 22 per cent CAGR over the last five years. After a 30 per cent growth in 2008-09, Kajaria Ceramics' net sales reported an 11 per cent growth in 2009-10.The company has reported 25% revenue growth and PAT growth of 87% during Q1FY11 and EPS for the quarter stood at Rs 1.5 as against Rs 0.8 in Q1FY10.

Price Target Price


Sector BSE code PE EPS Face Value Shares outstanding Book Value Market. Cap 52 Week H/L

Rs. 68.95 Rs. 85.00


Ceramics tiles 500233 12.33 5.59 2 73,583,580 25.73 507.42 70.45\31.65

Share Holding %

Share Price Graph Capacity expansion to meet the demand The company is setting up a six million square metre vitrified tile unit at a capex of Rs 125 crore at its Galipur unit in Rajasthan. This unit will start production by December 2010.we expect this should drive its volume growth for FY12 and will make the company to well placed to benefit from the industry growth. Outlook Kajaria is going to enter into high profitability zone due to cost saving
09
Net Sales PAT EPS P/E 664 8.9 1.18

Financial Performance (Consolidated)

Rs. in crore

10
736 35.85 4.91 14.04

11E
877 50.5 6.91 9.98

12E
965 67.9 9.3 7.41

resulted out of change in fuel and growth in value added tile segment. We believe that with excellent management, aggressive capacity expansion, low cost production and diversified distribution channel, The Company is well placed to benefit from the industry growth. By considering all the rationale we rate the company an out performer with a target price of Rs.85. At current market price of Rs.68.95 the stock trades at a PE of 9.98x its FY11 E EPS of Rs. 6.91.

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Phone: 0484-4059310

E-mail: info@thestrategist.co.in

URL: www.thestrategist.co.in