Kajaria Ceramics Downgraded To 'Neutral' Rating By Yes Securities Post Q1 Results
At current market price, the brokerage reckons stock is factoring-in major positives and trades at P/E(x) of 37x on FY27E EPS of Rs 33, leaving no major room for upside.
Going ahead, the brokerage reckons demand trajectory to improve on the back of better macro-environment and higher exports from India which will ease competitive intensity in domestic markets.
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Yes Securities Report
We believe volumes will continue to remain under pressure for this fiscal owing to soft domestic demand. Margins could remain elevated due to various cost optimization measures incorporated Kajaria Ceramics Ltd.
With lower employee cost and other expenses we believe margins will be ~16.5% for FY26E but topline growth will be muted. Also, impact of restructuring of Ceramics, GVT, PVT teams into ONE will be the key monitorable. Hence, though we have revised our margin expectation upwards for FY26E, we have downgraded our volume growth estimate to 4% YoY.
Going ahead, we reckon demand trajectory to improve on the back of better macro-environment and higher exports from India which will ease competitive intensity in domestic markets.
Hence, we factor-in 8%YoY volume growth in FY27E and expect operating margins to come in at 16.4%. We have revised our EPS estimates upwards for FY26E/FY27E by 16%/12% respectively due to revision in operating margin estimates.
We have valued Kajaria Ceramics at P/E(x) of 40x (avg 1-year forward multiple) on FY27E EPS of Rs 33, arriving at a target price of Rs 1,334. At CMP, we reckon stock is factoring-in major positives and trades at P/E(x) of 37x on FY27E EPS of Rs 33, leaving no major room for upside.
Hence, we downgrade the stock to Neutral from Buy.
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