Kajaria Ceramics -Acquisition of Gujarat based player for Rs 56 mn: Emkay

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Kajaria Ceramics

Acquisition of Gujarat based player for Rs 56 mn

BUY

CMP: Rs 69                                       Target Price: Rs 100

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n     Kajaria has acquired 51% stake in Morbi (Gujarat) based player – Soriso Ceramic at Rs 56 mn. With Debt of Rs 100 mn, the deal is valued at ~3x revenues and ~4x EV/EBITDA

n     Soriso has a capacity of 2.3 mn sqm of rectified floor tiles with revenues of Rs 550 mn and PAT of Rs 25 mn. Currently 75% of its produce is bought by Kajaria 

n     Though the deal is small in terms of revenues (1%) and PAT (1.5%) contribution, we believe Kajaria to use more such opportunities to accelerate growth and augment capacity

n     With further opportunity to double its capacity with this investment of Rs 100 mn, we view this acquisition as EPS accretive and maintain BUY