kajaria ceramics ltd isin...floera ceramics: the company has acquired 51% stake (increased to 70%)...

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KAJARIA CERAMICS LTDResult Update (PARENT BASIS): Q3 FY18

CMP: 577.90 APR 14th, 2018

Overweight ISIN:INE217B01036

Index DetailsSYNOPSIS

Kajaria Ceramics Ltd is the largest manufacturer ofceramic/vitrified tiles in India with an annualaggregate capacity of 68.60 MSM.

The company revenue turnover of Rs. 6611.60 mnfor the 3rd quarter of the FY 2017-18 as compared toRs. 6770.80 mn in the corresponding quarter of theprevious year.

During the 3rd quarter, net profit stood at Rs. 543.10mn as against Rs. 551.10 mn in the correspondingquarter ending of previous year.

During the quarter, EBIDTA stood at Rs. 1117.30mn as against Rs. 1147.40 mn in the correspondingperiod of the previous year.

Profit before tax (PBT) stood at Rs. 842.50 mn inQ3 FY18 as against Rs. 858.50 mn in thecorresponding quarter of the previous year.

EPS of the company stood at Rs. 3.42 in Q3 FY18as against Rs. 3.47 in the corresponding quarter ofthe previous year.

The company has approved expansion of capacity ofpolished vitrified tiles at existing location atMalutana, Rajasthan by 5.60 msm per annummaking total to 12.10 msm per annum.

Nine months ended on 31st Dec 2017, Net sales ofthe company were Rs. 20325.10 mn as compared toRs. 20502.40 mn in corresponding nine months ofthe previous year.

PAT of the company was Rs. 1689.90 mn in 9MFY18 against Rs. 1821.40 mn in correspondingperiod of the previous year.

Net Sales & PAT of the company are expected togrow at a CAGR of 9% each over 2016 to 2019E.

Stock DataSector Furniture,Furnishing,PaintsBSE Code 500233Face Value 1.0052wk. High / Low (Rs.) 787.55/535.00Volume (2wk. Avg.) 15000Market Cap (Rs. in mn.) 91828.31

Annual Estimated Results(A*: Actual / E*: Estimated)Years(Rs in mn) FY17A FY18E FY19ENet Sales 28545.10 28589.60 31162.66EBITDA 5116.90 4803.01 5320.97Net Profit 2528.40 2400.78 2675.43EPS 15.91 15.11 16.84P/E 36.32 38.25 34.32

Shareholding Pattern (%)

As on Mar 2018 As on Dec 2017

Promoter 47.58 47.58

Public 52.42 52.42

Others -- --

1 Year Comparative Graph

KAJARIA CERAMICS LTD S&P BSE SENSEX

PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)Kajaria Ceramics Ltd 577.90 91828.31 15.08 38.31 7.81 300.00Cera Sanitaryware Ltd 3293.00 42828.30 78.38 42.01 8.20 240.00Kansai Nerolac Paints Ltd 490.30 264232.30 9.77 50.18 9.42 305.00Somany Ceramics Ltd 681.65 28887.90 15.71 43.39 5.71 135.00


QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q3 FY18,

(Rs in million) Dec-17 Dec-16 % Change

Revenue 6611.60 6770.80 (2.35)

Net Profit 543.10 551.10 (1.45)

EPS 3.42 3.47 (1.45)

EBIDTA 1117.30 1147.40 (2.62)

Revenue for the 3rd quarter stood at Rs. 6611.60 million as compared to Rs. 6770.80 million, when compared with the

prior year period. EBIDTA is Rs. 1117.30 million as against Rs. 1147.40 million in the corresponding period of the

previous year. The company’s net profit stood at Rs. 543.10 million as against Rs. 551.10 million in the corresponding

quarter ending of previous year. Reported earnings per share of the company stood at Rs. 3.42 during the quarter, as

against Rs. 3.47 per share over previous year period.

Break up of Expenditure

Break up ofExpenditure

Value in Rs. Million

Q3 FY18 Q3 FY17 %Change

Cost of MaterialsConsumed 1672.70 1462.90 14%

Purchases of Stock-in-Trade 809.30 551.70 47%

Excise Duty 0.00 704.00 --

Employee BenefitsExpense 789.70 719.80 10%

Depreciation &Amortisation Expense 222.60 206.20 8%

Power & Fuel 1209.20 1009.10 20%

Other Expenses 954.80 950.30 0%


Latest Updates:

The company has approved expansion of capacity of polished vitrified tiles at existing location at Malutana, Rajasthan

by 5.60 msm per annum making total to 12.10 msm per annum. The plant is expected to be commissioned in FY

2018-19.

COMPANY PROFILE

Kajaria Ceramics is the largest manufacturer of ceramic/vitrified tiles in India and the 9th largest in the world. It has an

annual capacity of 68.37 mn. sq. meters presently, distributed across eight plants - one in Sikandrabad (UP), one in

Gailpur (Rajasthan), One in Malutana (Rajasthan), four in Morbi (Gujarat) and one in Vijaywada(AP).

JOINT VENTURES / SUBSIDIARIES:

SORISO CERAMICS:

Acquired 51% stake in Soriso Ceramic Pvt Ltd. based in Morbi, Gujarat in February 2011 with an annual capacity of

2.30 MSM of ceramic floor tiles. Further expanded the capacity to 4.60 MSM in March 2012. The revised capacity of

Soriso works out to 3.67 MSM per annum due to change in product profile.

JAXX VITRIFIED:

Acquired 51% stake (now 82%) in Jaxx Vitrified Pvt Ltd, based in Morbi, Gujarat in February 2012, with an annual

capacity of 3.10 MSM. Production commenced in March 2012. Jaxx has acquired another plant with a 2.60 MSM

annual capacity of polished vitrified tile in April 2013 in Morbi making the total capacity of Jaxx to 5.70 MSM per

annum. Further expansion of 4.50 MSM polished vitrified tile has increased Jaxx capacity to 10.20 MSM.

VENNAR CERAMICS:

Acquired 510/0 stake in Vennar Ceramics Ltd, based in Vijayawada, Andhra Pradesh in April 2012, with an annual

capacity of 2.30 MSM of high end ceramic wall tiles. Production has commenced on the 15 July, 2012. The revised

capacity of Vennar works out to 2.90 MSM per annum due to change in product profile.

COSA CERAMICS:

Acquired 51% stake in Cosa Ceramics Pvt. Ltd., based in Morbi, Gujarat – on 16th Oct.’12, with an annual production

capacity of 2.70 MSM of polished vitrified tiles and further increased to 5.70 MSM in Sep. 2014.

FLOERA CERAMICS:

The Company has acquired 51% stake (increased to 70%) in Kajaria Floera Ceramics Pvt. Ltd, which is putting up a

manufacturing facility of glazed vitrified tiles with a capacity of 5.00 MSM p.a. (earlier planned 5.70 msm p.a. of

polished vitrified tiles) in Andhra Pradesh. The land has already been acquired. The plant is expected to be

commissioned in 2nd half of FY 2018-19.


KAJARIA BATHWARE (P) LTD. (KBL):

Sanitaryware: Kajaria Sanitaryware (P) Ltd., in which KBL was holding 64% shares (82% now), has started the

production of sanitaryware in April 2014. KBL is in the process of increasing the capacity at the existing location

from 5.40 lac pcs p.a. to 7.20 pcs p.a.


FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as of March 31, 2016 -2019E

FY16A FY17A FY18E FY19EASSETS1) Non-Current Assets

a) Property, plant and equipment 11065.80 11626.80 12468.36 13474.46b) Capital Work in Progress 78.30 82.60 123.90 140.01c) Goodwill 105.40 105.40 145.45 157.09d) Other Intangible assets 33.90 40.70 35.82 40.11e) Investments 0.80 0.80 2.14 2.27f) Financial Assets

i) Investments 0.00 0.10 0.00 0.00ii) Loans 221.50 186.20 178.75 184.11

g) Other non -current assets 73.90 120.90 101.56 115.77Sub - Total Non- Current Assets 11579.60 12163.50 13055.98 14113.83

2) Current Assetsa) Inventories 3841.70 3720.20 3906.21 4179.64b) Financial assets

i) Trade receivables 2741.10 3389.20 4355.12 5139.04ii) Cash and bank equivalents 197.50 498.40 548.24 641.44

iii) Other Balances with Banks 17.70 21.20 28.62 35.78iv) Deposits 0.00 0.00 0.00 0.00

v) Loans 98.80 30.30 64.54 58.09vi) Others financial assets 17.20 15.00 19.50 21.06

c) Other-current assets 687.70 563.40 535.23 604.81Sub - Total Current Assets 7601.70 8237.70 9457.46 10679.86

Total Assets (1+2) 19181.30 20401.20 22513.44 24793.69EQUITY AND LIABILITIES1) EQUITY

a) Equity Share Capital 158.90 158.90 158.90 158.90b) Other equity 9560.10 11592.30 13993.08 16668.51c) Non-Controlling Interests 761.30 760.20 592.96 581.10

Total Equity 10480.30 12511.40 14744.93 17408.512) Non Current Liabilities

a) Financial Liabilitiesi) Borrowings 1421.10 1155.00 635.25 533.61

b) Provisions 95.70 103.10 133.00 126.35c) Deferred Tax Liabilities (net) 948.90 1106.20 1216.82 1289.83Sub - Total Non Current Liabilities 2465.70 2364.30 1985.07 1949.79

3) Current Liabilitiesa)Financial Liabilities

i) Borrowings 1104.90 550.80 908.82 727.06ii) Trade payables 2927.80 2921.00 2628.90 2523.74iii) Other financial liabilities 1365.10 1194.50 1373.68 1291.25

b) Other Current Liabilities 622.00 654.70 677.61 697.94c) Provisions 88.50 102.50 128.13 138.38d) Current tax liabilities (Net) 127.00 102.00 66.30 57.02Sub - Total Current Liabilities 6235.30 5525.50 5783.43 5435.39

Total Equity and Liabilities (1+2+3) 19181.30 20401.20 22513.44 24793.69


Annual Profit & Loss Statement for the period of 2016 to 2019E

Value(Rs.in.mn) FY16A FY17A FY18E FY19E

Description 12m 12m 12m 12mNet Sales 27005.80 28545.10 28589.60 31162.66Other Income 104.30 153.60 76.47 85.65Total Income 27110.10 28698.70 28666.07 31248.31Expenditure -22431.20 -23581.80 -23863.06 -25927.34Operating Profit 4678.90 5116.90 4803.01 5320.97Interest -344.60 -340.00 -241.08 -221.79Gross profit 4334.30 4776.90 4561.93 5099.18Depreciation -726.10 -813.90 -885.98 -983.44Exceptional items 0.00 0.00 7.50 0.00Profit Before Tax 3608.20 3963.00 3683.45 4115.74Tax -1247.10 -1424.90 -1396.44 -1519.94Profit After Tax 2361.10 2538.10 2287.02 2595.80Minority Interest -47.80 -9.70 113.76 79.63Net Profit 2313.30 2528.40 2400.78 2675.43Equity capital 158.90 158.90 158.90 158.90Reserves 9560.10 11592.30 13993.08 16668.51Face value 2.00 1.00 1.00 1.00EPS 29.12 15.91 15.11 16.84

Quarterly Profit & Loss Statement for the period of 30th Jun, 2017 to 31st Mar, 2018E

Value(Rs.in.mn) 30-Jun-17 30-Sep-17 31-Dec-17 31-Mar-18EDescription 3m 3m 3m 3mNet sales 7001.20 6712.30 6611.60 8264.50Other income 28.00 11.30 17.70 19.47Total Income 7029.20 6723.60 6629.30 8283.97Expenditure -5958.10 -5492.10 -5512.00 -6900.86Operating profit 1071.10 1231.50 1117.30 1383.11Interest -78.00 -63.90 -52.20 -46.98Gross profit 993.10 1167.60 1065.10 1336.13Depreciation -218.40 -215.70 -222.60 -229.28Exceptional items 7.50 0.00 0.00 0.00Profit Before Tax 782.20 951.90 842.50 1106.85Tax -293.10 -382.40 -311.40 -409.54Profit After Tax 489.10 569.50 531.10 697.32Minority Interest 20.70 67.50 12.00 13.56Net Profit 509.80 637.00 543.10 710.88Equity capital 158.90 158.90 158.90 158.90Face value 1.00 1.00 1.00 1.00EPS 3.21 4.01 3.42 4.47


Ratio Analysis

Particulars FY16A FY17A FY18E FY19E

EPS (Rs.) 29.12 15.91 15.11 16.84

EBITDA Margin (%) 17.33% 17.93% 16.80% 17.07%

PBT Margin (%) 13.36% 13.88% 12.88% 13.21%

PAT Margin (%) 8.74% 8.89% 8.00% 8.33%

P/E Ratio (x) 19.85 36.32 38.25 34.32

ROE (%) 24.29% 21.60% 16.16% 15.43%

ROCE (%) 32.28% 31.98% 24.96% 23.98%

Debt Equity Ratio 0.26 0.15 0.11 0.07

EV/EBITDA (x) 10.31 18.18 19.32 17.37

Book Value (Rs.) 122.33 73.95 89.06 105.90

P/BV 4.72 7.81 6.49 5.46

Charts


OUTLOOK AND CONCLUSION

At the current market price of Rs. 577.90, the stock P/E ratio is at 38.25 x FY18E and 34.32 x FY19E respectively.

Earning per share (EPS) of the company for the earnings for FY18E and FY19E is seen at Rs. 15.11 and Rs. 16.84

respectively.

Net Sales & PAT of the company are expected to grow at a CAGR of 9% each over 2016 to 2019E.

On the basis of EV/EBITDA, the stock trades at 19.32 x for FY18E and 17.37 x for FY19E.

Price to Book Value of the stock is expected to be at 6.49 x and 5.46 x for FY18E and FY19E respectively.

Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.

INDUSTRY OVERVIEW

Investment-inducing and business-strengthening Government policies coupled with growing affluence and soaring

aspiration are expected to sustain the sectoral growth momentum over the coming years. Further, the promise of industry

consolidation arising out of Government policies, raises the hopes for widening growth opportunities over the medium

term.

The Indian tile industry is poised to experience significant growth over the coming year. This optimism stems from the

important realities that are expected to catalyse tile demand pan-India.

Rollout of GST: This most significant fiscal policy announcement post Independence is expected to create a level playing

field between the informal players and the organised segment of the Indian tile industry – making branded tiles affordable

which should enhance consumer pull.

Housing sector: According to credible opinion makers, the housing sector is at a tipping point and will be the economy’s


next big growth driver. According to CLSA, India expects to build 60 million new homes to be built between 2018 and

2024. In addition, declining home finance rates and increasing funding options are expected to catalyse the demand for

housing over the coming years.

Policy driven demand: The number of ambitious programmes launched in the last two years by the Centre, like Smart

Cities Mission, Swachh Bharat Abhiyaan (Sanitation for All by 2019), Atal Mission for Rejuvenation, Urban

Transformation (AMRUT) and Housing for all by 2022 is expected to provide significant impetus to the demand for tiles.

During the year under review, there are no material changes and commitments affecting the financial position of the

Company and also no change in the nature of business of the Company.


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The information and opinions in Firstcall Research was prepared by our analysts and it does not constitute an offer orsolicitation for the purchase or sale of any financial instrument including any companies scrips or this is not an officialconfirmation of any transaction. The information contained herein is from publicly available secondary sources and dataor other secondary sources believed to be reliable but we do not represent that it is accurate or complete and it should notbe relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damagethat may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/or its affiliates and/or employees will not be liable for the recipients’ investment decision based on this document.

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Exposure/Interest tocompany/sector UnderCoverage in the CurrentReport

Dr.C.V.S.L. Kameswari M.Sc, PGDCA,M.B.A,Ph.D (Finance)

Pharma &Diversified

No Interest/ Exposure

U. Janaki Rao M.B.A CapitalGoods


B. Anil Kumar M.B.A Auto, IT &FMCG


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kajaria ceramics ltd isin...floera ceramics: the company has acquired 51% stake (increased to 70%)...

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