'Buy' Kajaria Ceramics Reiterates Motilal Oswal, Sees 26% Upside; Here's Why

Motilal Oswal Report

We reiterate our Buy rating on Kajaria Ceramics Ltd. with a target price of Rs 1,450, based on 40 times Dec’26E EPS.

We estimate Kajaria Ceramics to deliver a CAGR of 12%/18%/21% in revenue/Ebitda/PAT over FY25-27. We estimate Ebitda margin at ~15%/16% in FY26/FY27 versus ~15%/14% in FY24/FY25E (historical average at ~16% over last 10 years).

We estimate its ROE/ROCE to improve to 19%/22% by FY27 versus 15%/18% in FY25E. Kajaria Ceramics has been generating FCF since FY16, which is likely to continue going forward as well. We expect net cash to increase to Rs 5.4 billion/Rs 6.4 billion in FY26/FY27 from Rs 4.1 bilion in FY25E, despite high capex (Rs 10.0 billion over FY25-27).

In the last three months, the stock has corrected more than 25% due to lower demand, increased supply from Morbi-based players (limiting realization growth), and margin pressure.

The stock is currently trading at 36x/29x FY26E/FY27E EPS (versus 10-year average of 38 times).

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