Too much competition but there is still a 50% unorganized market to be captured. Still it might not give anything more than a 20-25% compounding. I am wondering whether I should move out on some upside and shift to other options.
One factor which is adversely effecting the RE sector n consequently the ancillary players like Astral n Kajaria is the slowdown in RE due to environmental reasons. SC has banned mining of sand, n MEF brick kiln operations n NGT the underground boring. Due to it RE players n ancillary players are facing the slowdown IMHO. But replacement mkt shud bode well for both these cos.
This shud be a temporary phase as dwelling unit is the prime need due to rapid urbanisation going on in India.
Astral is still better placed due to its unique better qualitative product n shud hv better pricing power. kajaria has invested heavily in brand n that shud also give it pricing power.
I think we need to comparative study of various listed companies in ceramics/tiles to get who can grow at faster pace and get re-rated. There is fall in current stock price across the board for the companies. BUsiness wise, I think tiles are here to stay. Look at developed markets, tiles are very common due to known reasons. Oppurtunity is big here in India. View invited?
haveinitiated position in the ceramics company…in the ratio of 30:60 somany:kajaria .
somany at price of 70 and kajaria at 185. 55-60 and 150-160 are good support zones for the stocks.
Q4/Fy-13 Results out…
Total Income up 20.5% to 448.99 Cr from 372.65 Cr.
EBIDTA up 16% to 67.83 Cr from 58.47 Cr.
Net Profit up 31% to 30.77 Cr from 23.49 Cr.
EBIDTA margin is 15.1% v/s 14.5% (Q3-13) and 15.7% (Q4-12)
NET Profit margin is 6.9% v/s 6% (Q3-13) and 6.3% (Q4-12)
Total Raw material costs as a %ge to Income is 45.6% v/s 46.8% (Q3-13) and 51.1% (Q4-12)
Employee costs to Income is 7.7% v/s 8.7% (Q3-13) and 7.1% (Q4-12)
Power & Fuel expenses to Income is 18.7% v/s 20% (Q3-13) and 15.1% (Q4-12)
Other expenses to Income is 12.9% v/s 10.1% (Q3-13) and 11.1% (Q4-12)
Financial costs to EBIT is 17.8% v/s 23.9% (Q3-13) and 27.7% (Q4-12)
Almost 23% reduction in financial costs helped Net Profit.
Tax Rate 31.9% v/s 31.8% (Q3-13) and 34.4% (Q4-12)
Fy-13 v/s Fy-12:
Total Income up 22.8% to 1611.98 Cr from 1313.03 Cr
EBIDTA up 18.6% to 244.64 Cr from 206.2 Cr
Net Profit up 29.2% to 104.51 Cr from 80.88 Cr
Reported Full-Year EPS 14.2 v/s 10.99
On 30/04/2013, stock on BSE closed at Rs. 208/- up 2.3%
(Results came in after market hours)
The results seem pretty decent and what is most encouraging is the 60 bps improvement in the EBIDTA margins. Slight improvement in margins signifies that the company is able to pass on increase in prices of raw materials & fuel (natural gas) to its customers albeit with a lag. The margins were hit by increase in prices of natural gas in Q3. The margins might still improve slightly in next few quarters. In addition, the change is business model by acquiring stakes in ceramic companies is also paying off with improvement in ROCE & ROEs and lower leverage.
What is your view on the ideal valuation of a company like Kajaria ?Is PE of ~15 ideal with an expected growth of 15-20% ?
Yes 15 PE should be a fair valuation for kajaria.
Here is the link to investor update for Q4:
Company promises to add more capacity and launch ‘never seen before’ products.
Playing devils advocate here, isn’t sales of Kajaria dependent on real estate, which most of us think is in bubble territory.
Last time when the real estate crashed in 2008, kajaria almost defaulted on all its Working capital and term loan obligations.
Want, to understand how are they insulating themselves this time around.
In my opinion, the deleveraging exercise undertaken by the company since 2008 along with shift in the business model (acquiring equity stake in already operational/verge of completion plants) is the one thing which has changed in the company.
2008 2009 2010 2011 2012 2013
Gearing (D/E) 2.18 2.01 1.39 1.28 0.96 0.82
If we look at the above table, the company has continuously deleveraged itself over the past 5 years. Although, it will definitely be impacted by the slowdown in the real estate sector, however, the impact of it will not be as severe as it was in FY08 and FY09. In addition, the replacement market (renovation of old house) also provides cushion against the slowdown.
Yes Exactly…There is a bubble in the real estate :
Scenario 1 : Prices Fall of Realestate -
People shall buy bcoz of better affordability , and bcoz of recency effect. When they buy they have to get it furnished.
Moreoever existing properties being built by developers are already being pre-fitted with tiles. (EVen those lying vacant).
Scenario 2 - Prices stay stable or increase
Plus there is a big gap in commercial space. This space keeps getting bigger
Ankit- Thanks, got it.
Ashwini- The problem last time happened beacuse builders bought the tiles, laid them and then refused to pay guys like Kajaria:).
In both scenarios, if a large % sales is happening directly to real estate players issues coming up in cash flows is a distinct possibility.
In case they have been able directly go to retail level, then things should be ok.
In the latest edition of Outlook Business their is an article on Kajaria. It says that the companies dependenece directly on builders is only around 20%.
That then kind of brings in comfort as the chances of their money being stuck is that much less.
Not much activity on this thread for long.Ubs has recently given a target of 325 to this co.Citi also entered in the co in a block deal in May end 13. Jwalamukhi fund of HSBC who already owns 11% stake in Astral Poly n good stake in Cera n thus understands this market well owns a substantial chunk .GMO is another major investor.
The co seems to be doing good thanks to it’s acquisition strategy. Can it be a fast grower in a slow growing market at worst?
Q1/Fy 13-14 Results out…
Total Income up 22.8% to 437.63 Cr from 356.35 Cr.
EBIDTA up 15% to 64.66 Cr from 56.28 Cr.
Net Profit up 16% to 25.8 Cr from 22.25 Cr.
EBIDTA margin is 14.8% v/s 15.1% (MQ-13) and 15.8% (JQ-12)
NET Profit margin is 5.9% v/s 6.9% (MQ-13) and 6.2% (JQ-12)
Total Raw material costs as a %ge to Income is 45.9% v/s 45.6% (MQ-13) and 44.9% (JQ-12)
Employee costs to Income is 10.1% v/s 7.7% (MQ-13) and 9% (JQ-12)
Power & Fuel expenses to Income is 19.1% v/s 18.7% (MQ-13) and 19.2% (JQ-12)
Other expenses to Income is 10.1% v/s 12.9% (MQ-13) and 11.1% (JQ-12)
Financial costs to EBIT is 22.1% v/s 17.8% (MQ-13) and 29.5% (JQ-12)
Tax Rate 34% v/s 31.9% (MQ-13) and 31.1% (JQ-12)
EPS 3.51 v/s 3.02
Recorded TTM (sum of 4 quartr) diluted EPS: Rs. 14.69
At 01:50 pm on 30/07/2013, stock on BSE trading flat at Rs. 251/-
according to another update, kajaria plans to enter the sanitary ware space thru a greenfield project in colloboration with partners at morbi… it will own 64% stake with other portion being held with JV partners who will look after day to day activities.
Interesting… Cera getting into tiles and Kajaria getting into sanitaryware.
Kajaria sent an EGM notice to shareholders for voting on
- Increase in FII limit
- Preferential allotment of 2000000 lac shares & 5885420 Convertible warrants (25% amount now & 75% at conversion time) to Westbridge Crossover Fund, LLC - a total of 7.41% of shareholding after dilution
Jwalamukhi Investment Holding which is a subsidary of Westbridge Crossover Fund, LLC already holds 5777005 shares (7.85% at present).
Mr.Sandeep Singhal who is a direcotr of Kajaria is a direcotr & shareholder of WestBridge Advisors Pvt Ltd
Post conversion of warrants the total entity may hold 14.67% of Kajaria’s shares
Mr. Ashok Kajaria, Chairman & MD, and Mr.Sanjeev Agarwal,VP (Finance & Corporate Strategy),add the con call. Highlights of the Concall by Capital Mkt;
- The Company has achieved a consolidated production growth of 8% YoY to 11.27 million sqm (msm) in Q2FY15. The production mix was 7.58 msm from own manufacturing and 4.14 msm from JVs. For H1FY15, the Company production grew by 13% YoY to 23.09 msm. The production mix was 15.05 msm from own manufacturing and 8.04 msm from JVs.The consolidated sales volume grew 7% YoY to 14.30 msm in Q2FY15.Of the total sales volume, 7.51 msm came from own manufacturing, 3.77 msm from JVs and 3.02 msm from outsource/imports. For H1FY15, the sales volume grew by 11% YoY to 28.30 msm. The sales volume mix was 14.65 msm from own manufacturing, 7.61 msm from JVs and 6.04 msm from outsource/imports.
- The consolidated revenues increased by 16% YoY to Rs 537.70 crore for Q2FY15 and higher by 17% YoY to Rs 1040.63 crore for H1FY15. The EBITDA margin improved by 80 bps YoY to 15.4% in Q2FY15, as a result EBITDA rose by 22% to Rs 82.74 crore. Net profit increased by 48% YoY to Rs 39.75 crore for Q2FY15 and higher by 49% YoY to Rs 78.33 crore for H1FY15.The consolidated debt of the company stoodat Rs 207 crore in Q2FY15, down from Rs 236 crore in FY14 and Rs 320 crore in FY13. The debt to equity ratio softened to 0.32 in Q2 as compared 0.41 in FY14 and 0.82 in FY13
- The consolidated working capital cycle declined from 25 days in FY14 to 22 days in Q2FY15. Also, consolidated return on equity stood at 27.58 in Q2FY15 as compared 27.91 in FY14 and 32.51 in FY13.The company has successfully completed brownfield expansions for 4.50 msm of high end polished vitrified tile at Jaxx (JV). Another JV Cosa has also commissioned 3.00 msm of polished vitrified tile (soluble salt) capacity. Both the plants have commissioned in September 2014, as a result, turnover will followed in H2 of current fiscal.
- The company plans to use Rs 60-65 crore on brand promotion this fiscal and expects it will further go higher. Of the total on brand promotion, the company spends around Rs 2-3 crore in sanitaryware and rest in tiles business.The company expects sanitaryware segment will generates turnover of around Rs 50 crore in current fiscal and Rs 70-75 crore for FY16.The company expects operating costs will come-down in next couple of years due to fall in diesel prices. Also, the company expects gas prices likely declinefrom January 2015 due to sharp correction of crude oil prices in the international marketand as GAIL will start import of shale gas from US from 2017.
- The market shares of the company increased to 9.5% by the end of Q2FY15 from around 6% five year ago.The company expects that better days are just round the corner. The optimism is based on an important reality â the “Toilets for all by 2019” and “Houses for all by 2022” targets set by hon’able PM which promise incremental offtake of the company products over the medium-term.The company expects volume growth would be better in H2 of the current fiscal, with full year volume growth likely to be around 13%-14% and topline would be above 20%.
Ongoing Expansion (Standalone)
- Greenfield Project (Rajasthan) - the company has decided in the Board Meeting dated 7th May 2014 to put up 5 MSM annual capacity of polished vitrified tiles at a new location in Rajasthan. The project is expected to be completed by June 2015.
- Brownfield Project (Rajasthan) - Also, the company, in the Board Meeting dated 1st August 2014 decided to put a brownfield facility at its existing location in Rajasthan for production of 3 MSM Capacity of ceramic wall tiles. The production is expected to commence by March 2015.
Joint Ventures / Subsidiaries
SORISO CERAMICS- Acquired 51% stake in Soriso Ceramic, based in Morbi, Gujarat in February 2011 with an annual capacity of 2.30 MSM of ceramic floor tiles. Further, the company expanded the capacity to 4.60 MSM. Production for enhanced capacity started in March 2012. Soriso has operated at 96% capacity in Q2FY15.
JAXX VITRIFIED- Acquired 51% stake (now 61%) in Jaxx Vitrified, based in Morbi, Gujarat in February 2012, with an annual capacity of 3.10 MSM. Production has commenced in March 2012. Jaxx has acquired another plant with a 2.6 MSM annual capacity of polished vitrified tile in April 2013 in Morbi making the total capacity of Jaxx to 5.70 MSM per annum. Jaxx has operated at full capacity. The commercial production in respect of brown field expansion of 4.50 MSM polished vitrified tile capacity has commenced production on 6th Sep. 2014. The company expects this plant to attain full capacity utilisation during the next quarter.
VENNAR CERAMICS - Acquired 51% stake in Vennar Ceramics, based in Vijayawada, Andhra Pradesh inApril 2012, with an annual capacity of 2.30 MSM of high end ceramic wall tiles.Production has commenced on the 1st July, 2012. Vennar has operated at full capacityin Q2FY15.
COSA CERAMICS - Acquired 51% stake in Cosa Ceramics, based in Morbi, Gujarat â on 16thOct.'12, with an annual production capacity of 2.70 MSM of polished vitrified tiles. COSA has operated at full capacity in Q2FY15. The commercial production in respect of brown field expansion of 3.00 MSM polished vitrified tile capacity has commenced production on 29th Sep. 2014 which is expected to attain full capacity utilization during the next quarter.
TAURUS TILES - The Company has entered into another JV, Taurus Tiles, Which is putting up a 5 MSM polished vitrified tile capacity at Morbi (Gujarat). Kajaria owns 51% equity in Taurus. The production is expected to commence by Q4FY15.
KAJARIA BATHWARE (KBL) - a) Sanitaryware: Kajaria Sanitaryware, in which KBL holds majority shares, has started the production of sanitaryware on 6th April 2014. However, the production has started momentum in October 2014. The company hopes to achieve full production in Q4FY15. b) Faucet: The Company has initiated putting up a faucet plant of 1.50 million pieces facility at Gailpur (Rajasthan) at a cost of Rs. 50 crore. The civil work is in progress. The project is expected to commence operation in Q1FY16.