Kajaria Ceramics Ltd.|Q2FY15 Result Update | Better than expectations : IndiaNivesh

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Kajaria Ceramics Ltd declared Q2FY15 results that better than our estimates;
however it was in-line with street estimates. We are positive on the long term
prospects of the company given its leadership position and its thrust to maintain
this position. We are positive on the execution capabilities of the company given
the on-schedule commencement of the expansion plans. On-time execution of
expansion plans is likely to result in return of 27.6% ROE in FY16E after an expected
dip in FY15E at 25.4% from 27.9% in FY14. The outlook of the sector has become
more robust given the government thrust on building new toilets, new government
campaign of Swachh Bharat Mission and corporate participation in the mission
through CSR activities. We arrive at a revised target price of Rs 635 per share by
revising our target multiple upwards to 22x from 18x earlier on revised FY16E
earnings estimate of Rs 28.9 per share. Accordingly, we revise our rating on the
stock to HOLD from SELL earlier.

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