Business: Brokerage firm Nuvama Institutional Equities has retained a buy rating on shares of Kajaria Ceramics and revised its target price to ₹1,754 from ₹1,683 earlier. The update comes at a time when the sector is recovering and demand is rising due to revival in the property market. Nuvama said after its recent meeting with Kajaria Ceramics senior management, they are confident that the company will outperform the industry and achieve volume growth of 10-12% in FY25E. It also expects property demand to rise and estimates margins to top 15% to 17% due to higher value-addition and improved operating leverage.
Additionally, the company estimates revenue from bathroom products, plywood and adhesives to reach ₹6.75 billion, ₹1.25 billion and ₹1.5 billion, respectively, by FY27. Nuvama said in its report that the company has developed a wide range of products over the years. The company’s comprehensive product portfolio, aggressive brand investments, extensive distribution network of 1,600 dealers and continuous expansion of production capacity have been and continue to be the key factors that have contributed to the company’s better performance than its competitors.
The company’s unwavering focus on brands (advertising spend is growing at a compound annual rate of over 30%, representing 2.5-3% of sales, compared to 12-13% of competitors) and strengthening its value chain have helped it achieve this. Increase advertising costs. Market share will certainly increase significantly. Nuvama said, “We therefore expect the company to register revenue and PAT CAGR of 15% and 32%, respectively, over FY23-26, as well as strong pre-tax ROE/ROCE of over 20%.”
