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TP : Rs143
Investment Rationale
§ Indian ceramics / tiles industry is likely to report volume growth of 14% (FY10-13E) while growth in high-end
segment is likely to remain at 20%. 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 will increase share of value added tiles 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 38% to company’s topline) in future
§ Increase in asset turnover ratio is expected to result in improved RoCE from 17.0% to 28.5% and RoIC from
17.2% to 31.0% over FY10-FY13E
§ We expect the company's revenue and EBITDA to grow by 22% and 23% CAGR (FY11E-13E) to Rs 14.2 bn and
Rs 2.3 bn by FY13E, respectively
Valuations
§ At current price, the stock trades at 7.6x FY13 EPS, EV / EBITDA of 4.3x and P/BV of 2.1x. With higher asset
turnover, RoE are expected to improve from 20.4% in FY10 to 31.7% by FY 13E
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