Emkay:: Buy Kajaria Ceramics - Results ahead of estimates

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Kajaria Ceramics

Results ahead of estimates

BUY

CMP: Rs 74                                       Target Price: Rs 100

---

n     Results ahead of estimates with 41% increase in revenues  to Rs 2.5 bn and 113% PAT growth to Rs 176 mn   

n     Strong demand supported higher trading since purchase of traded goods (% of sales) increased from 37% to 41%

n     Entered into MOU with Turkey based company –Eczasibasi, for exclusive distribution of its products for 5 years  

n     Upgrade FY11E estimates by 8% to Rs 8.1 on strong Q3FY11 results, maintain FY12E estimates at Rs 10, maintain BUY

Revenues grew by 41% on higher trading …

Kajaria’s net revenues increased by 41% yoy / 14% qoq to Rs 2.5 bn which was 7%

ahead of our estimates. Purchase of traded goods increased by 54% yoy to Rs 1 bn

(40% of sales as against 37% previous year) facilitating higher revenue growth.

… EBITDA margins declined by 40bps to 15.6%

The company has shifted from high cost propane to low cost natural gas from May’10

which helped it to reduce fuel cost. P&F cost declined by 22% to Rs 236 mn. P&F cost

(as % of sales ex trading) declined by 1130 bps to 15.5%. However despite savings in

P&F cost, EBITDA margins contracted by 40bps to 15.6%, which was in line with

estimates. We will like to highlight that margins contraction is mainly contributed to

higher trading. EBITDA increased by 38% yoy / 14% qoq to Rs 397 mn which was

ahead of our estimates of Rs 372 mn.

PAT doubled to Rs 176 mn, ahead of estimates

For Q3FY11, PAT increased by 113% yoy / 32% qoq to Rs 176 mn (17% higher than

our estimates of Rs 150 mn) with an PS of Rs 2.4. Strong PAT growth is supported by

revenue growth and lower interest cost (interest declined by 27% to Rs 73 mn).

Capex on schedule, Signed MOU with Turkey based company

Kajaria has entered into MOU with Turkey based company –Eczasibasi, for exclusive

distribution of its products including the sanitary ware and CP Fittings under the Brand

name of "VitrA" for 5 years. Company has chalked down capex plan 1) of Rs 194 mn for

conversion of ceramic floor tile at Unit-3, Sikandrabad plant into vitrified tile with

expected completion by Feb’11. 2) Its capex plan to put vitrified plans (polished and

glazed) is as per schedule (expected completion by Jan’11) should drive its volume

growth for FY12.

Upgrade FY11 estimates by 8%, Maintain Buy

On back of strong Q3FY11 results, we are upgrading our FY11 PAT estimates by 8% to

Rs 594 mn (previous Rs 549 mn) and EPS to Rs 8.1 (Rs 7.5). We maintain our FY12E

earnings at Rs 10. We maintain BUY recommendation on the stock based on 10x FY12

estimates.