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8.4x FY2012E
CMP : Rs77
RECO : BUY
TP : Rs91
Investment Rationale
§ Kajaria to outpace the high-end tile industry growth of 17% by reporting a 26% CAGR in volumes during FY09-
12E period.
§ Commissioning of new vitrified plant in FY10-11 will help the company accelerate its market share in the highend
segment and gain volume growth and will also enable Kajaria to address newer segments.
§ Given the healthy growth prospects of the tile industry in general and high-end segment in particular, Kajaria's
brownfield expansion for manufacture of vitrified tiles comes at an opportune time.
§ Its capex to result in incremental revenues of Rs 2.5 bn, 170 bps EBITDA margin expansion, higher asset
turnover ratio from 0.9x to 1.2x resulting in higher RoCE
§ We expect the company's EBITDA and PAT to grow by 21% and 37% CAGR (FY10E-12E) to Rs 1.7 bn and Rs
671 m by FY12E, respectively
Valuations
§ At current price, the stock trades at 8.4x FY12 EPS, EV / EBITDA of 4.9x and P/BV of 2x. With higher asset
turnover, RoE are expected to improve from 20% in FY10 to 26% by FY 12E.
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