Mostly to do with excise vs GST impact. You have to deduct out excise from last years numbers. Still with EPS maybe at 16 levels this year, stock still trades at 27x PE.Very expensive.
Will increase in custom duty will effect tiles manufacturer in short or long term
Kajaria AR summary
KAJARIA FY19
Kajariaâs FY19 annual report analysis highlights the impact of macroeconomic weakness leading to continued pressure on its return
ratios (RoE down 310bp to 15.5%/post-tax RoCE down 160bp to 14.4%).
This was led by (a) EBITDA margin decline (tiles business) to 15% (v/s
17% in FY18) on rising fuel costs and decreasing unit realization, and (b)
rising capital intensity to finance capex for tiles, bath-ware and
plywood. Management has plans of adopting an asset-light business
model â outsourcing production rather than setting up own facilities.
Despite revenue growth of 9.1% to INR29.6b, EBITDA declined 1.5% to
INR4.5b. While EBIT margins of the tiles segment declined 80bp to
13.2%, it was superior to its peers (Somany: 6.9%, Asian Granito: 5.0%).
However, performance of the bath-ware (Kerovit) was sub-par with
EBITDA margins at 4.3%, despite being up 260bp YoY (v/s 14.3% of
CERA) due to lower scale of operations. Earnings to cash flow conversion
improved to 100% (v/s 80% in FY18), due to decline in cash conversion
cycle to 90 days (v/s 103 days in FY18). This was led by increase in trade
payables to 98 days (v/s 89 days in FY18). In FY19, the company forayed
into the plywood business via its subsidiary Kajaria Plywood. However,
losses of INR60.5m turned Kajaria Plywoodâs net worth negative (-
INR23.5m) in its very first year of operation.
ďŽ Rising fuel costs and lower realizations hurt profitability: Despite
revenue growth, EBITDA declined to INR4.5b (v/s INR4.6b in FY18),
primarily led by (a) an 18% surge in fuel costs to INR6.2b on rising
gas prices, and (b) decline in unit realizations, leading to 9.1%
revenue growth to INR29.6b; volume growth was 12% to 80msm.
ďŽ âKerovitâ delivers robust growth, but margins weak: In FY19,
Kerovit reported 30% revenue growth to INR1.8b. Gross margin at
54% was similar to its peer (55% for CERA). However, higher
employee cost at 21% (v/s 12% for CERA) due to lower scale of
operations kept EBITDA margins low at 4.3% (v/s 14.7% for CERA).
Cash conversion cycle in FY19 remained high at 194 days (v/s 158
days for CERA) due to higher inventory at 170 days (CERA: 130
days).
ďŽ Lower working capital intensity improves OCF: Despite decline in
EBITDA, OCF increased to INR3.2b (v/s INR2.4b), led by lower
working capital requirements. Earnings to cash conversion
improved to 100% (v/s 80% in FY18), as cash conversion cycle
declined to 90 days (v/s 103 days in FY18). This was primarily led by
the rise in trade payables to 98 days (v/s 89 days in FY18).
Standalone trade payables stood at 62 days (v/s 51 days in FY18).
ďŽ Weak operational performance hurts subsidiariesâ returns:
Despite improvement, subsidiariesâ margins at 8% (v/s 5% in FY18)
remained lower than the standalone at 15% (v/s 17% in FY18).
Over FY15-19, aggregate RoCE of subsidiaries stood halved at 5.8%
v/s 13.6% in FY15). Lower returns contributed to the decline in
consolidated RoCE to 14.4% (v/s 16.0% in FY18), while standalone
RoCE stood at 21% (v/s 25% in FY18). Over FY18-19, KJCL divested
entire stake in its two subsidiaries â Soriso Ceramics and Taurus tiles
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Interesting TV Interview by top mgmt of the company :
Whats more noteworthy, 2nd line of leadership also came in for that.
Disc : Invested
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Pretty phenomenal numbers! Lower production but higher sales implies they are trading and still making higher margin than last year. Kajaria brand clearly commands a premium in the market!
bdf7de23-4392-4835-8a5e-64da0f5c0fd7-2.pdf (3.0 MB)
HDFC Sec initiates coverage on Kajaria Ceramics.
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Kajaria
Key concall highlights
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Exports business saw rapid growth, while the domestic market fell 20% during Q4FY21 owing to lockdowns.
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Company expects to pass on the inflation in gas prices (up nearly +20% YoY) to consumers with a time lag of 45 days.
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Company achieved capacity utilization of 98% for the quarter.
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Ongoing capex plans are as follows: 1) Gailpur plant â Rs. 60cr by Mar 2022, adding 4.2 msm capacity; 2) Srikalahasti plant â Rs. 110cr by Dec 2021, adding 3.8 msm capacity; and, 3) Jaxx Plant - 80cr capex by Jan 2022, adding 4.4 msm capacity.
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Can you please recheck, is this correct? Almost everyone has reported strong growth in Q4 including Kajaria. Which market fell 20%?
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I think they meant Q1FY22
The company said they saw 75% of normal sales in April but 35% in May, and around 75% till mid June
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Does anyone knows whether Kajaria imports Ukranian soil? (although they tom tom about Desh Ki Mitti in their TV ads⌠
If so, that would explain price action for last 2 weeks
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hdfc securities institutional research report on Building materials enclosed
Building materials - Multiple tailwinds for a cheerful new year - HSIE-202301050653325279381.pdf (3.4 MB)
excellent report
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Kajaria ceramics Q3 concall highlights -
Slow demand in Oct due festivals and extended holidays. Resurgence in demand seen in Nov, Dec
Sales at 1091 vs 1068 cr
EBITDA at 133 vs 180 cr, Margins down 500 bps, at 12 pc
NP at 74 vs 125 cr
Started using alternate fuel wet Dec 23
This should result in significant savings in power and fuel cost
Bathware, Plywood revenues (included in Consolidated revenues) at 79 vs 82 cr and 19 vs 25 cr
EBITDA contraction due disruption in gas supply, very high gas prices
WC days at 66 vs 62 due increased inventory
Blended fuel prices ( Gas + Alternate ) for the company are down almost 14 pc in Q4 - company resorting to dealer level discounts to stimulate demand
Jan demand has been tepid
Nepal plant (new one) to be ready by Mar 24. Its coal fired, Margins likely to be higher
Expect to achieve 14 pc+ EBITDA margins in Q4
FY 23 capex at 90 cr. Next year should be 300 cr+
Current capacity utilisation at 90-93 pc
Bathware brand ( Kerovit ) making descent progress
Sustainability of alternate fuel (bio fuel) is not an issue. Avlb in abundance
Divesting their stake in Vinar plant (to receive divestment proceeds ie 18 cr in Apr 23). Aim to fulfil supply shortage by sourcing from Morbi based manufacturers
Composition of alternate fuels at 35 pc of the total (30 pc biofuels and 5 pc Lpg). Rest remains natural gas
Current industry size at 52k cr. Domestic at 40k cr. Rest is exports
Supply of bio fuels is not a constraint round the year. Even bio fuels prices likely to moderate till May 23
Planning to set up a JV in Dubai Mkt. To mainly concentrate on exports in Gulf and North Africa
Large slab tiles seeing good traction in India. Plus the price realisation and margins here are much better
For 9M, plywood and laminates business is up 20 pc. Should reach good scale in 3-4 yrs
Morbi players did 1500 cr exports each in Nov,Dec
Shows buoyancy in export mkts. Kajaria can this exploit going fwd
Aim to add 400 dealers in next 3 yrs. Added 125 dealers in last 9 months, 35 of which were exclusive Kajaria. Total dealer count at 1825 now
Disc: invested, biased
Price reversal in gas prices âŚmight impact cost of production for ceramic industries
Kajaria Ceramics Ltd --Q2FY24 --Earning Call Highlights --20th Oct23 :
Financials :
âRevenue : 1122Cr --Growth of 4% YnY
EBITDA : 179.71CrâGrowth of 39% YnY
EBITDA Margin : 16.02% âgrowth of 400bps on 12.01% YnY
PAT : 107.96 Cr --growth of 55% YnY
Volumes : 26.47 MSM âGrowth of 6% YnY over 24.91 MSM in Q2FY23
Sanitaryware / Faucets : 85.29Cr --Growth of 14.5% YnY
Plywood : 23.47Cr âGrowth of 21% YnY
Adhesives : 13.03Cr --Growth of 38.2% YnY
WC days decreased to 53 days from 62 days QnQ
âWhile H1FY24 witnessed weaker than anticipated demand, gradual pick-up in volumes since September and expected improvement in demand environment emanating from rub-off of strong growth in real estate sector is expected to drive better volume growth in H2FY24
âThe recent commissioning of the Sikandrabad and Gailpur modernization/expansion projects augurs well for our future growth.
âIndia is become a production hub for exports --being the lowest cost producer in the world. India exports increased to 16k Cr in FY23 --which is likely to reach 20/21k Cr in FY24. Indian exports a/c for 15% of worldâs total exports
âIf the current rate of growth continues , INDIA will become largest exporter in the world for Tiles by FY25
âRevised guidance : Looking at Q3 better than Q2 and Q4 will be better than Q3 --so things are improving . Margin guidance is 14 to 16% but it will be at upper end of this band with 6% growth in Volumes in Q2 and 7% Volume growth in Q1 & if we are able to achieve 16% , going forward it should be slightly better
âFuel pricing outlook : Q2 was 38 INR & going forward it will be more or less same +/- Rs 1.00 as brent has slightly increased so it would be in this band & since we are using Bio-fuel so it wont go beyond that
âRegional breakdown for Fuel : Gas is 40 INR in North , 38 INR in south , West is 33 INR and avg. is about 38 INR for Q2FY24
âSaving of power & fuel was expected to be 150Cr for full year , how much was it in H1 ? â it was slightly better than 75Cr & some of it was passed on to the trade so it would be 80/85Cr Approx
âCapex : This year we will spend 370Cr in FY24 and going forward it would be 200/250Cr for the next 3 yrs. 50Cr in Gailpur Modernisation & Sikandrabad was 100Cr+ , Nepal project is 91Cr , Kerrovit global is 80Cr & Corporate office is around 50Cr & 26Cr is capex maintenance âtotal of 370Cr in this FY24
âExport : H1 exports from India is about 10kCr +
âPricing action in Tiles ? âNo change
âDemand : Real estate is good for the last 2 yrs , earlier they sold own inventory , 2nd year the construction started , our demand has started coming now with Sepâ23 better than last 5 months and things looking positive . First they sell cement & other bldg material product for making the bldg like cables etc & now the time has come for finishing end where tiles / sanitaryware / plywood / paints --all these segments have started moving & Now we are seeing demand coming back in the real estate sector for our segment.
âVolume Growth : Q1 was 7% , in Q2 we did 6% and with the mkt looking up it will be better than first 2 Qts and Q4 will be better than 3rd --so avg. will be close to 9/10%
âWe gave a guidance of 13/15% in Volume terms growth in Mayâ23 & now what is happening in the industry we see a tough mkt and whatever is the on-ground situation , we have revised accordingly. Cables and wires are used in the time of construction , post that tiles / sanitaryware / paints / plywood etc starts moving
âEmployee cost spike ? âWe have taken increment provision in this Q2 & next Qtr will be slightly higher than Q2 .
Ad Spend : We spent 108Cr last year & tgt is to 130/140Cr by FY24
âWhere is the demand getting generated from ? â First 6 months the volume growth was 6/7% and next 6 months it will be better than 6/7% & growth is coming from everywhere in good proportion , mainly from Tier2/Tier3 cities where new houses are being built & more for renovation so greater demand from smaller towns
âIncreasing our Footprint in International mkt with JVs in Dubai & UK mkts , what is the export sales outlook ? âOverall we are strong in domestic mkt & exports will always be a small % of our overall sales & by opening a showroom in Dubai & London --we are trying to see how we can get some share of export mkt & increase them
âRevenue Split or Dealer Split between Tier 1 & Tier2/Tier3 Towns ? âCurrently for Revenues âMetros are 15/16% , Tier 1 is about 30% & Tier 2 is 30% & Tier 3 is the balance and Tier 4 is hardly any %. & Our expansion plan is Tier 2/3 where major construction is happening & partly into Tier 4. The current distribution is similar to Revenue mix
âSplit of Revenues between Tiles / Bathware & Adhesives & their respective Margins ? âFor last 6 months â Tiles is 90% , Bathware is 7% & Adhesives + Plywood is 2/3%. Respective Margins : Tiles is 16% EBITDA , Bath ware is 9% EBITDA , Plywood is -ve 2/3%
âBathware & Sanitaryware combined demand outlook ? âFor us it grew 16% in H1 & next 6 months will be much better than first 6 months so we are looking at blended growth of 20%+ for the entire year
So Tiles we are talking about 9/10% Volume growth and for Bathware / Sanitaryware we are looking at 20%+ growth
âDealer No. for 30th Sep : Current strength is 1950 Dealers & we started with 1840 Dealers & these are all over India
âOther expenses are higher ? âMainly due to Ad expenses & it will be similar to Q2
Exports mkt for Tiles from INDIA , what is driving this ? âGas prices what we have now are also there internationally , Indian mfrers are paying similar to International prices . Last year in FY22 --Gas prices were 8X to 10X & India was 1.5X / 2X but right now more or less its same & India is competitive due to Morbi where we have more than 600 Mferers
& out of that 120 are focussing mainly on exports because we are a competitive producer as Country so thatâs why exports are up and looking forward we will see this going up.
âRealisation for Subsidaries has gone up & outsourcing has gone down significantly , any reason ? âThere is some error at our end where instead of subsidary it got added to outsourcing part so now we have corrected it and going forward whatever we have reported in Q2 will be the trend
âGas cost as a % of topline and as a % of operating expenses , they have increased QnQ while your avg. cost was 38 INR & in Q1 it was 39 INR so what is the reaons ? --It has gone up slightly due to some power cost increase in one unit in Rajasthan where there is some change in the JV .
The capacity utilization in Q2 is higher ( 95%+) than Q1 so thatâs the reason Power cost has gone up Qtr on Qtr
âVolume growth in Sepâ23 and for Oct first 15 days ? âSepâ23 was roughly about 9% & Oct it should be better
âOur JV has not taken any Shutdown in Morbi Last year when rest of them had taken shutdown in Q3 & this year also we have not taken / planned any shutdown
âOverall Ceramic World data , the Industry Volume had degrown by 9% in CY22 because of poor pricing ( 9/10X ) in certain parts of the world but everything has come back to maximum of 1.5X so the industry overall in the world should do better.
âIn the last 6 months of the year the growth is always been better , this is the trend of last 5/10 yrs . Elections are always +ve trigger as there is more work in the system so basically its positive
âPricing & discounting trend in Q2 ? âSlight gas prices have gone up by 5 INR from 24th Aug & 1st Sepâ23 & in Morbi and nothing much will happen in Q3 gas pricing so we are not looking at any changes in future Qtrs as well
âLast year in Plywood the turnover was 77 Cr and this year its 100Cr + & as of now plan is to invest in this biz as the Plywood industry is 27500Cr in the country with Organised only 7k Cr & unorganised in 20500Cr & the trend is from unorganised to organised shift so its a big industry and we will gain some mkt share as we move forward
âCapacity Utilization : 98%
âNatural gas is linked to Brent crude & as Brent prices have gone up recently as high as 97$ . The prices of gas cost in North would have been much higher but fortunately since we are using Bio-fuel , we have been saved & current Avg. in Q2 was 38 INR & for Q3 it will be similar +1 INR max
âMorbi capacities : our info. Says that there are 25/30 plants are coming up in Morbi but mainly they will be for exports because its picking up in exports
PS : I may have missed 1 or 2 points due to Audio clarity issues, please refer to detailed transcripts as & when published
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