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Motilal Oswal Report
We estimate Kajaria Ceramics Ltd. revenue/Ebitda/profit after tax compound annual growth rate of 11%/17%/20% over FY24-26. We estimate its return on equity/return on capital employed to improve to 22%/26% by FY26 versus 18%/21% in FY24.
Kajaria Ceramics has been generating free cash flow since FY16, which is likely to continue going forward as well. The company turned net cash in FY19 and we expect it to remain so going ahead as well (net cash is estimated at Rs 3.8 billion in FY26 versus Rs 1.8 billion in FY23) despite higher capex (Rs 10.2 billion over FY24-26).
The stock is currently trading at an attractive valuation of 29 times FY26E earnings per share (versus 37 times last five-year average one-year forward price/earning).
We reiterate our Buy rating on Kajaria Ceramics with a target price of Rs 1,600 based on 40 times FY26E EPS.
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