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RECO : BUY TP : Rs100
Investment Rationale
§ Indian ceramics / tiles industry is likely to report volume growth of 14% (FY09-12E) while growth in high-end
segment is likely to remain at 19%. Kajaria with its presence in only high end segment with market share of 5%
will be a strong beneficiary of this growth in high end segment
§ 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. Capacity additions in high end
segment to increase from 10% in FY10 to 30% by FY12E
§ To leverage its well established dealers network and brands, trading of tiles in high end segment, is likely to
remain a growth driver (trading revenues contribute approx 40% to company’s topline) in future
§ Increase in asset turnover ratio is expected to result in improved RoCE from 13.1% to 21.7% and RoIC from
13.2% to 22.5% over FY09-FY12E
§ We expect the company's revenue and EBITDA to grow by 20% and 24% CAGR (FY10E-12E) to Rs 10.7 bn and
Rs 1.8 bn by FY12E, respectively
Valuations
§ At current price, the stock trades at 7.5x FY12 EPS, EV / EBITDA of 4.7x and P/BV of 1.9x. With higher asset
turnover, RoE are expected to improve from 20% in FY10 to 28% by FY 12E
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RECO : BUY TP : Rs100
Investment Rationale
§ Indian ceramics / tiles industry is likely to report volume growth of 14% (FY09-12E) while growth in high-end
segment is likely to remain at 19%. Kajaria with its presence in only high end segment with market share of 5%
will be a strong beneficiary of this growth in high end segment
§ 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. Capacity additions in high end
segment to increase from 10% in FY10 to 30% by FY12E
§ To leverage its well established dealers network and brands, trading of tiles in high end segment, is likely to
remain a growth driver (trading revenues contribute approx 40% to company’s topline) in future
§ Increase in asset turnover ratio is expected to result in improved RoCE from 13.1% to 21.7% and RoIC from
13.2% to 22.5% over FY09-FY12E
§ We expect the company's revenue and EBITDA to grow by 20% and 24% CAGR (FY10E-12E) to Rs 10.7 bn and
Rs 1.8 bn by FY12E, respectively
Valuations
§ At current price, the stock trades at 7.5x FY12 EPS, EV / EBITDA of 4.7x and P/BV of 1.9x. With higher asset
turnover, RoE are expected to improve from 20% in FY10 to 28% by FY 12E
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