Kajaria Ceramics Ltd

Stock Opportunities Not-so-Hidden Gems
21

I am also talking with various local/big shot dealers. They all have one thing to say- Kajaria is No-1 in wall tiles but lacks competency in floor tiles.

Does any valuepickr contact his architect n find out more about Kajaria ,range,quality ?

Also have the new digitally printed tiles are a threat to Marble due to cost n time savi g benefits?

22

Hi,

I was just re-evaluating Kajaria and looking at other ceramics businesses esp somany and orient bell. Below are some financial snap shots for all these companies. Orient bell is no where near Kajaria and Somany, the reason being all time low EBIT margins, all time low capital turnover (much less than Kajaria and Somany) and low interest coverage ratio.

Kajaria has highest margins in the segment with EBIT margins of the order of 12, almost double of Somany. Both Kajaria and Somany are managing capital really well with Somany bettering Kajaria in terms of capital turnover. Somany, though has higher debt/equity, it is managing it well with decreasing debt continuously.

In terms of valuation

Price/Sales EV/EBDIT

KajariaĆ¢s 1.3 10

Somany 0.4 6.5

All in all, In terms of business quality, Kajaria is still the best business. Having said that Somany is not far behind and given the attractive valuations as compared to

Kajaria, I feel, it does have a case for capital allocation over Kajaria.

Please share your views.

Kajaria:

Revenue

1,309.27

954.52

730.92

669.09

500.54

EBIT

156.31

122.28

93.90

59.03

61.90

Operating Margin

11.94

12.81

12.85

8.82

12.37

Working Capital

-80.59

-67.08

25.51

72.03

101.89

Capital Turnover

3.36

2.32

1.96

1.67

1.13

RoCE (EBIT/Total Capital)(1-tax_rate)

28.04

20.77

17.63

10.34

9.79

Debt Ć¢to- Equity

0.62

1.26

1.39

2.01

2.18

Working Capital/Sales

-6.16

-7.03

3.49

10.77

20.36

Raw Material / of Sales

55.37

57.69

50.88

54.13

55.53

Other Misc Expenses / Sales

7.66

8.65

10.66

8.92

10.48

Tax Rate

30.26

30.48

28.00

29.36

26.50

Intereset / Operating Profit

19.41

22.21

36.77

48.61

50.99

Somany:

Revenue

872.33

709.68

534.87

442.31

329.72

EBIT

56.35

51.36

44.66

30.31

24.67

Operating Margin

6.46

7.24

8.35

6.85

7.48

Working Capital

8.55

41.98

13.43

34.79

38.72

Capital Turnover

4.31

3.22

3.06

2.68

1.86

Debt -to- Equity

1.21

1.79

1.87

2.04

2.56

Working Capital/Sales

0.98

5.92

2.51

7.87

11.74

Raw Material / of Sales

59.96

60.31

57.01

53.35

47.61

Other Misc Expenses / Sales

11.64

13.63

14.86

15.21

18.25

Tax Rate

30.64

31.35

32.97

34.40

45.17

Intereset / Operating Profit

28.03

28.33

24.82

37.40

45.95

Orient Bell:

Revenue

543.31

290.66

251.12

225.74

213.56

EBIT

33.10

22.81

24.77

20.14

13.98

Operating Margin

6.09

7.85

9.86

8.92

6.55

Working Capital

64.13

39.06

25.93

19.86

28.61

Capital Turnover

1.81

2.43

2.35

2.09

1.74

RoCE (EBIT/Total Capital)(1-tax_rate)

7.73

13.34

16.20

13.04

7.95

Debt -to- Equity

1.08

1.49

0.97

1.30

1.89

Working Capital/Sales

11.80

13.44

10.33

8.80

13.40

Raw Material / of Sales

47.39

51.15

46.26

39.09

46.14

Other Misc Expenses / Sales

14.69

15.92

17.12

18.37

20.35

Tax Rate

0.98

32.44

34.04

37.99

42.92

Intereset / Operating Profit

44.11

33.15

21.64

33.20

41.34

1 Like
23

Hi,

I was just re-evaluating Kajaria and looking at other ceramics businesses esp somany and orient bell. Below are some financial snap shots for all these companies. Orient bell is no where near Kajaria and Somany, the reason being all time low EBIT margins, all time low capital turnover (much less than Kajaria and Somany) and low interest coverage ratio.

Kajaria has highest margins in the segment with EBIT margins of the order of 12, almost double of Somany. Both Kajaria and Somany are managing capital really well with Somany bettering Kajaria in terms of capital turnover. Somany, though has higher debt/equity, it is managing it well with decreasing debt continuously.

In terms of valuation

Price/Sales EV/EBDIT

KajariaĆ¢s 1.3 10

Somany 0.4 6.5

All in all, In terms of business quality, Kajaria is still the best business. Having said that Somany is not far behind and given the attractive valuations as compared to Kajaria, I feel, it does have a case for capital allocation over Kajaria.

Please share your views.

Kajaria:

Revenue

1,309.27

954.52

730.92

669.09

500.54

EBIT

156.31

122.28

93.90

59.03

61.90

Operating Margin

11.94

12.81

12.85

8.82

12.37

Working Capital

-80.59

-67.08

25.51

72.03

101.89

Capital Turnover

3.36

2.32

1.96

1.67

1.13

RoCE (EBIT/Total Capital)(1-tax_rate)

28.04

20.77

17.63

10.34

9.79

Debt Ć¢to- Equity

0.62

1.26

1.39

2.01

2.18

Working Capital/Sales

-6.16

-7.03

3.49

10.77

20.36

Raw Material / of Sales

55.37

57.69

50.88

54.13

55.53

Other Misc Expenses / Sales

7.66

8.65

10.66

8.92

10.48

Tax Rate

30.26

30.48

28.00

29.36

26.50

Intereset / Operating Profit

19.41

22.21

36.77

48.61

50.99

Somany:

Revenue

872.33

709.68

534.87

442.31

329.72

EBIT

56.35

51.36

44.66

30.31

24.67

Operating Margin

6.46

7.24

8.35

6.85

7.48

Working Capital

8.55

41.98

13.43

34.79

38.72

Capital Turnover

4.31

3.22

3.06

2.68

1.86

Debt -to- Equity

1.21

1.79

1.87

2.04

2.56

Working Capital/Sales

0.98

5.92

2.51

7.87

11.74

Raw Material / of Sales

59.96

60.31

57.01

53.35

47.61

Other Misc Expenses / Sales

11.64

13.63

14.86

15.21

18.25

Tax Rate

30.64

31.35

32.97

34.40

45.17

Intereset / Operating Profit

28.03

28.33

24.82

37.40

45.95

Orient Bell:

Revenue

543.31

290.66

251.12

225.74

213.56

EBIT

33.10

22.81

24.77

20.14

13.98

Operating Margin

6.09

7.85

9.86

8.92

6.55

Working Capital

64.13

39.06

25.93

19.86

28.61

Capital Turnover

1.81

2.43

2.35

2.09

1.74

RoCE (EBIT/Total Capital)(1-tax_rate)

7.73

13.34

16.20

13.04

7.95

Debt -to- Equity

1.08

1.49

0.97

1.30

1.89

Working Capital/Sales

11.80

13.44

10.33

8.80

13.40

Raw Material / of Sales

47.39

51.15

46.26

39.09

46.14

Other Misc Expenses / Sales

14.69

15.92

17.12

18.37

20.35

Tax Rate

0.98

32.44

34.04

37.99

42.92

Intereset / Operating Profit

44.11

33.15

21.64

33.20

41.34

24

Has anybody used Kajaria latest GVT range of tiles? Itā€™s said that with larger size of tiles , use of plastic strip for joining n latest grouting techniques itā€™s very difficult to didtinguish if itā€™s a marble or GVT. The designs in GVT are varied n beautiful. Then the price differential of 100 Rs per sq ft for tiles vs 800 for Italian marbles n laying time of 2 days vs 2 months for marbles gives an unbeatable edge to tiles co.

Kajaria it seems has exploited the JV route beautifully boosting ROCE. Why canā€™t this strategy be copied by other cos ? Is Johnson tiles a listed co? What abt Somany & itā€™s overall strategy?

1 Like
25

As mentioned above,

We also need to study why HR Johnson (listed entity: Prism Cement) failed to hold market lead, despite of being theincumbent market leader with solid brands.

26

Vivek,

Somany seems to be walking on the same lines. From the AR, somany has acquired 26% (Against the 51% that Kajaria does) stake in both Vintage tiles and commander Vitrified Pvt Ltd. in 2012.

Atul

27

Rudra,

Had a quick look at the prism cement web site and the only product I could see there isPortland Pozzollana Cement.

http://www.prismcement.com/product.htm

28

The value picks guy wrote about Orient Bell recently -

http://value-picks.blogspot.in/2012/12/orient-bell-ltd.html

disc: I have initiated a small position in Orient Bell.

29

Kajaria-Vennar ceramic unit to step up capacity

http://www.thehindubusinessline.com/companies/kajariavennar-ceramic-unit-to-step-up-capacity/article4283575.ece

30

Refer this:

http://www.prismcement.com/Investor_PresentationMay2012.pdf

isPortland Pozzollana Cement.

Link: http://www.prismcement.com/product.htm http://www.prismcement.com/product.htm Link: http://www.prismcement.com/product.htm

31

Prismā€™s division of tiles brand is HR Johnson & website is http://www.hrjohnsonindia.com & http://johnsondigital.in .Is anyone of the seniors Donald,Hitesh,Ayush etc tracking Prism Cement. RMC division website is www.rmcindia.com & of course the Cement division website is prismcement.com

32

I went for a vacation in Kerala last week and saw big advertisements of Kajaria all around Kochi and nearby places. Infact, there were unusually many home furnishing stores there.

33

Q3/Fy-13 Results outā€¦

Total Income up 19.1% to 417.71 Cr from 350.73 Cr.
EBIDTA up 8.3% to 60.68 Cr from 56.05 Cr.
Net Profit up 18.5% to 24.95 Cr from 21.06 Cr.

EBIDTA margin is 14.5% v/s 15.4% (SQ-12) and 16% (DQ-11)
NET Profit margin is 6% v/s 6.8% (SQ-12) and 6% (DQ-11)

Total Raw material costs as a %ge to Income is 46.8% v/s 48.5% (SQ-12) and 51.5% (DQ-11)
Employee costs to Income is 8.7% v/s 8.6% (SQ-12) and 7.6% (DQ-11)
Power & Fuel expenses to Income is 20% v/s 18.2% (SQ-12) and 15.1% (DQ-11)
Other expenses to Income is 10% v/s 9.4% (SQ-12) and 9.9% (DQ-11)

Power & Fuel Exp gone up 57.6% Y-o-Y to 83.38 Cr hurt EBIDTA.

Financial costs to EBIT is 23.9% v/s 20.8% (SQ-12) and 33.6% (DQ-11)

Tax Rate 31.8% v/s 31.6% (SQ-12) and 29.9% (DQ-11)

9M/Fy-13 v/s 9M/Fy-12:
Total Income up 23.7% to 1162.99 Cr from 940.38 Cr (Fy/11-12: 1313.03 Cr)
EBIDTA up 19.7% to 176.81 Cr from 147.73 Cr (Fy/11-12: 206.2 Cr)
Net Profit up 28.5% to 73.74 Cr from 57.39 Cr (Fy/11-12: 80.88 Cr)

Reported 9-month EPS 10.02 v/s 7.80 (Fy/11-12: 10.99)
Recorded TTM diluted EPS: Rs. 13.21

On 21/01/2013, stock on BSE closed at Rs. 210.25/- Down 6.45%

1 Like
34

Thanks Deepak, You are very regular in the result updates and i appreciate that :slight_smile:

35

Kajaria share tanked after less than expected rise in net profit. Atre the reasons for the less profit more secular ? is this an opportunity to load more shares after a bad quarter or stay away?

36

It just seems to be a not so good quarter with story still intact. For fresh capital allocation, I 'll consider somany over Kajaria though.

37

Power and fuel costs impact the margin. Confident of Growing NP better than 20%.

http://www.moneycontrol.com/news/results-boardroom/pf-cost-impacted-marginsq3-kajaria-ceramic_811421.html

1 Like
38

Wanted to put this info from analyst presentation on website. 50% unbranded players in Morbi, Gujrat. Rest 50 as follows

Turnover as on date
31.03.2012
(Rs/Cr)
H&R Johnson 1729
Kajaria Ceramics 1407
Nitco Tiles 959
Somany Ceramics 927
Asian Granito 622
RAK Ceramics 600
Orient Bell Ceramics 584
Varmora 356
Murudeshwar Ceramics 190
Regency Ceramics 166
Euro Ceramics 160
Bell Granito 140
Others (Marbomax, Restile, Decolight, Marbito, Spartek etc) 660
Total 8500

Kajaria has a big chunk of Vitrified tiles that is outsourced. If they can reduce it (Acquisition of Cosa is supposed to help) it can improve the margins.

I am worried about the higher fuel costs of RLNG. They completely switched to RLNG at 2 plants last year. The question is - can they increase prices?

39

The luxury tile market is heating uphttp://www.thehindubusinessline.com/companies/asian-panaria-eyeing-710-of-luxury-tile-market/article4357019.ece

40

I think at around 15 times FY 13 earnings, there are practically very few chances of rerating. Price will mirror earnings or in some time period ā€“ optimism or pessimism of the crowd.

2 Likes