Professional Documents
Culture Documents
Company Update
Upgrade in price target
December 31, 2010 ¾ Our recent interaction with the management suggests that
Reco Previous Reco industry demand remains encouraging helping it to boost
revenues from higher trading, +75% in H1FY11
Buy Buy
CMP Target Price ¾ Capacity in high end segment to increase from 10% in FY10
to 30% by FY12E
Rs 73 Rs 100
EPS change FY11E/12E (%) 11 / 10 ¾ Capex plans are on schedule 1) New vitrified plant to
Target Price change (%) 10 commission by Jan’11; 2) Conversion of ceramic floor tiles
Nifty 6,135
into vitrified tiles by Feb’11
Sensex 20,509 ¾ Upgrade FY11E EPS by 12% to Rs 7.5 and FY12E by 10% to
Rs 10, and price target by 10% to Rs 100 and maintain BUY
Price Performance
(%) 1M 3M 6M 12M
Absolute (6) (4) 14 46 Strong demand in higher end ceramics segment to help boost revenues
Rel. to Nifty (8) (5) (0) 26 Kajaria Ceramics is likely to benefit from strong growth in the higher end vitrified tiles
Source: Bloomberg segment. Growth in this segment has helped the company leverage its strong brand and
distribution network to boost revenues through higher trading. Trading revenues
Relative Price Chart
90 Rs 40
increased by ~75% yoy in H1FY11 (contributed 40% to revenues as against 27%
%
previous year). Management expects that growth in trading revenues is likely to remain
80 30
buoyant in the near future.
70 20
Kajaria Ceramics (LHS) Rel to Nifty (RHS) bn. Though we estimate there may be some pressure on EBITDA margins (since
Source: Bloomberg margins in trading business are lower than own manufacturing) yet we have upgraded
our overall EBITDA by 2.4% in FY11E and 4.2% in FY12E. Consequently, we upgrade
Stock Details our FY11E EPS by 10.7% to Rs 7.5 and FY12E by 9.9% to Rs 10.
Sector Ceramics
Bloomberg KJC@IN Capex on schedule, to be completed by end of FY11
Equity Capital (Rs mn) 147 1) Conversion of ceramic floor tiles at Unit-3, Sikandrabad plant (with capacity of 4 mn
Face Value(Rs) 2 sqmt) into vitrified tiles (capacity of 2.4 mn sqmt) with cost of Rs 194 mn is on
No of shares o/s (mn) 74 scheduled and expected to complete by Feb’11.
52 Week H/L 84/47
2) The company’s capex plan to put vitrified tiles (polished and glazed) is as per
Market Cap (Rs bn/USD mn) 5/111
schedule (expected completion by Jan’11) and should drive the volume growth for
Daily Avg Volume (No of sh) 381039
FY12.
Daily Avg Turnover (US$mn) 0.7
Due to continued focus on increasing / shifting the capacity towards higher end vitrified
Shareholding Pattern (%) tiles segment - capacity in high end (vitrified / polished / glazed) tiles should increase to
S’10 J’10 M’10 30% by FY12E from 10% in FY10. We expect this shift to help the company improve its
Promoters 51.3 51.3 51.3 average realisations and margins.
FII/NRI 3.3 2.5 3.5
Institutions 4.1 5.8 6.5
Upgrade price target by 10%, maintain BUY
Private Corp 14.1 18.2 17.6 Driven by upgrade in earnings, we upgrade our price target by 10% to Rs 100 (10x
Public 27.2 22.2 21.2 FY12E EPS) and re-iterate our BUY recommendation on the stock. Kajaria Ceramics
Source: Capitaline
has witnessed 22% growth in revenues in H1FY11 and we expect the momentum to
continue on the back of strong demand growth.
Financial Snapshot Rs Mn
Rohan Gupta Net EBITDA EPS EPS RoE EV/
rohan.gupta@emkayglobal.com YE-Mar Sales (Core) (%) PAT (Rs) % chg (%) P/E EBITDA P/BV
+91 22 6612 1248 FY09 6,649 949 14.3 89 1.2 (40.7) 5.6 61.2 9.0 3.4
FY10 7,355 1,148 15.6 359 4.9 302.8 20.4 15.2 7.0 2.9
Pragya Bhardwaj
FY11E 9,055 1,432 15.8 549 7.5 53.1 25.9 9.9 6.1 2.3
pragya.bhardwaj@emkayglobal.com
+91 22 6612 1272 FY12E 10,663 1,754 16.5 737 10.0 34.3 27.9 7.4 4.6 1.9
Revision Table
FY11E FY12E
Rs mn Old New % Old New %
Estimates Estimates Change Estimates Estimates Change
Net sales 8,644 9,055 4.8% 9,747 10,663 9.4%
EBITDA 1,399 1,432 2.4% 1,684 1,754 4.2%
EBITDA % 16.2% 15.8% -40 17.3% 16.5% -80
PAT 496 549 10.7% 671 737 9.8%
EPS 6.7 7.5 10.7% 9.1 10.0 9.9%
Key Financials
DISCLAIMER: This document is not for public distribution and has been furnished to you solely for your information and may not be reproduced or redistributed to any other person. The manner
of circulation and distribution of this document may be restricted by law or regulation in certain countries, including the United States. Persons into whose possession this document may come are
required to inform themselves of, and to obs erve, such restrictions. This material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it. This
report is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. No person associated with Emkay
Global Financial Services Ltd. is obligated to call or initiate contact with you for the purposes of elaborating or following up on the information contained in this document. The material is based upon
information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon. Neither Emkay Global Financial Services Ltd., nor any person connected
with it, accepts any liability arising from the use of this document. The recipient of this material should rely on their own investigations and take their own professional advice. Opinions expressed are
our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance,
or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
We and our affiliates, officers, directors, and employees world wide, including persons involved in the preparation or issuance of this material may; (a) from time to time, have long or short positions in,
and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a
market maker in the financial instruments of the company (ies) discussed herein or may perform or seek to perform investment banking services for such company(ies)or act as advisor or lender /
borrower to such company(ies) or have other potential conflict of interest with respect to any recommendation and related information and opinions. The same persons may have acted upon the
information contained here. No part of this material may be duplicated in any form and/or redistributed without Emkay Global Financial Services Ltd.'s prior written consent. No part of this document
may be distributed in Canada or used by private customers in the United Kingdom. In so far as this report includes current or historical information, it is believed to be reliable, although its accuracy and
completeness cannot be guaranteed.