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
Kajaria’s 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 – 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 Plywood’s net worth negative (-
INR23.5m) in its very first year of operation.
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.
‘Kerovit’ 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).
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).
Weak operational performance hurts subsidiaries’ returns:
Despite improvement, subsidiaries’ 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 – Soriso Ceramics and Taurus tiles
Interesting TV Interview by top mgmt of the company :
Whats more noteworthy, 2nd line of leadership also came in for that.
Disc : Invested
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.
Kajaria
Key concall highlights
-
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 – Rs. 60cr by Mar 2022, adding 4.2 msm capacity; 2) Srikalahasti plant – Rs. 110cr by Dec 2021, adding 3.8 msm capacity; and, 3) Jaxx Plant - 80cr capex by Jan 2022, adding 4.4 msm capacity.
Can you please recheck, is this correct? Almost everyone has reported strong growth in Q4 including Kajaria. Which market fell 20%?
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
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
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
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
Kajaria Ceramics Ltd --Q2FY24 --Earning Call Highlights --20th Oct23 :
Financials :
–Revenue : 1122Cr --Growth of 4% YnY
EBITDA : 179.71Cr–Growth of 39% YnY
EBITDA Margin : 16.02% —growth of 400bps on 12.01% YnY
PAT : 107.96 Cr --growth of 55% YnY
Volumes : 26.47 MSM —Growth of 6% YnY over 24.91 MSM in Q2FY23
Sanitaryware / Faucets : 85.29Cr --Growth of 14.5% YnY
Plywood : 23.47Cr —Growth of 21% YnY
Adhesives : 13.03Cr --Growth of 38.2% YnY
WC days decreased to 53 days from 62 days QnQ
–While 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
–The recent commissioning of the Sikandrabad and Gailpur modernization/expansion projects augurs well for our future growth.
–India 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 world’s total exports
—If the current rate of growth continues , INDIA will become largest exporter in the world for Tiles by FY25
–Revised 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
–Fuel 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
—Regional 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
–Saving of power & fuel was expected to be 150Cr for full year , how much was it in H1 ? – it was slightly better than 75Cr & some of it was passed on to the trade so it would be 80/85Cr Approx
–Capex : 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 —total of 370Cr in this FY24
–Export : H1 exports from India is about 10kCr +
–Pricing action in Tiles ? —No change
–Demand : 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 Sep’23 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.
–Volume 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%
—We gave a guidance of 13/15% in Volume terms growth in May’23 & 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
–Employee cost spike ? —We 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
—Where is the demand getting generated from ? — 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
—Increasing our Footprint in International mkt with JVs in Dubai & UK mkts , what is the export sales outlook ? —Overall 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
—Revenue Split or Dealer Split between Tier 1 & Tier2/Tier3 Towns ? —Currently for Revenues —Metros 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
—Split of Revenues between Tiles / Bathware & Adhesives & their respective Margins ? —For last 6 months – 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%
—Bathware & Sanitaryware combined demand outlook ? —For 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
—Dealer No. for 30th Sep : Current strength is 1950 Dealers & we started with 1840 Dealers & these are all over India
—Other expenses are higher ? —Mainly due to Ad expenses & it will be similar to Q2
Exports mkt for Tiles from INDIA , what is driving this ? —Gas 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 that’s why exports are up and looking forward we will see this going up.
—Realisation for Subsidaries has gone up & outsourcing has gone down significantly , any reason ? —There 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
–Gas 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 that’s the reason Power cost has gone up Qtr on Qtr
—Volume growth in Sep’23 and for Oct first 15 days ? —Sep’23 was roughly about 9% & Oct it should be better
—Our 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
–Overall 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.
—In 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
—Pricing & discounting trend in Q2 ? —Slight gas prices have gone up by 5 INR from 24th Aug & 1st Sep’23 & in Morbi and nothing much will happen in Q3 gas pricing so we are not looking at any changes in future Qtrs as well
—Last 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
—Capacity Utilization : 98%
—Natural 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
—Morbi 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
Kajaria Ceramics -
Q2 FY 25 results and concall highlights -
Revenues - 1179 vs 1122 cr, up 5 pc
EBITDA - 156 vs 179 cr, down 12 pc ( margins @ 13.5 vs 16 pc )
PAT - 86 vs 111 cr, down 22 pc
Excessive rains in July, Aug led to subdued Q2 for the tiles Industry. Still, company was able to grow their volumes by 8.5 pc YoY to 28.7 million Sq Mtrs ( vs Industry’s volume growth of 3 pc ). Price growth has been (-) 3 pc
EBITDA margins remained under pressure - also due to losses incurred in the recently commissioned Sanitaryware Unit at Morbi. This unit was under stabilisation in Q2. Expect significant improvement in H2
Segment wise revenues -
Tiles - 1053 cr, up 5 pc
Bathware - 90 cr, up 6 pc
Plywood - 18 cr, down 26 pc
Adhesives - 18 cr, up 40 pc
Company buys LNG from GAIL ( in North India ) and GSPC ( in Morbi ). Also, company meets aprox 23 pc of their energy requirements from Biofuels - which helps them save on energy costs
Company is seeing good demand pickup from its dealers in Oct. They expect H2 to be much better vs H1
Currently, company’s working capital days stand @ 59 days. By end of Mar 25, they intend to bring this down to 50 days - both by reducing inventories and receivables
In Tiles Industry, there are no distributors. There are only dealers. Kajaria currently has 1850 dealers. Post Sep ( ie rains ), they are seeing much better demand from their dealers
They intend to keep growing @ 5-6 higher than the Industry growth rates
Increased volumes in H2 should result in better EBITDA margins in H2
The margins hit because of operationalisation of new bath ware unit was to the extent of 100 bps ( roughly )
Company’s tiles pant in Nepal has gone live in Sep 24. It has a capacity of 5 million sq mtr. Nepal’s total tile mkt is aprox 25 million sq mtr. Company is looking to ramp up production in the next 3-6 months as the pant gets stabilised and as more and more dealer showrooms come up
Even in sanitary ware, a growth of 6 pc in Q2 was sub-par. They expect the same to pick up wef Q3
For full FY 25, company is guiding for a volume growth of 9-10 pc in the tiles business
They are also guiding for full yr EBITDA margins of 15-16 pc for FY 25
Company has recently set up a team for Govt projects in South, West and East India. They already had a team for North India. They expect a 25 pc growth in the Govt Projects business in FY 25 ( albeit on a small base )
Last yr, 10 pc of company’s tiles business came from Govt projects. This yr, they expect it to go upto 12-13 pc of company’s overall tiles business. By the end of FY 26, they intend to take it to 15 pc of total tiles business
Company got an opportunity in UK to acquire 7 retail stores for aprox 7 million pounds in a distressed sale scenario. So, they acquired them and converted them into Kajaria Exclusive stores
In H1, bathware segment has grown by 6 pc. For FY 25, company aims to grow the bath ware segment by 15 pc ( they r expecting H2 to be much better )
Setting up a plant in Nepal helps the company save on a lot of logistics costs. This should give them a good price advantage to ramp up sales in Nepal
Out of the 1850 dealers that the company has, company provides channel financing to aprox 200 dealers. By Mar 25, company intends to cover another 300 dealers by providing them channel financing
Capex planned for full FY 25 @ 200 cr ( including maintenance capex )
Company does not foresee any deterioration in working capital cycle even when they r ramping up their govt business. Acc to the company, GoI has been making prompt payments - even earlier than the private sector !!!
Earlier in Q1, company had acquired 90 pc stake in a brand called - KERONITE. They have a manufacturing capacity of 6 million Sq Mtr. This is supposed to be an economy brand and has been acquired to take on some of the competition from the Morbi players in the domestic mkts
Disc: hold a tracking position, biased, not SEBI registered, not a buy/sell recommendation
Nepal plant is margin accretive for sure. Pain for kajaria has been visible for sometime. In the current market enviroment where Risks are looming Kajaria stands out with the Top notch Building material business they own and that too at scale. Downside seems limited for sure. And rewards can be liberal for someone holding it for a longer term
The Kajaria Ceramics Limited Q3 FY25 conference call provided insights into the company’s recent performance and future outlook. Here’s a summary of the key points:
Q3 FY25 Performance:
•
Subdued Market Conditions: The tile industry experienced a weak domestic market and sluggish exports, leading to a subdued quarter for Kajaria1.
•
Volume Growth: Despite the market challenges, tile volumes grew by 6.7% year-on-year to 28.90 million square meters1.
•
Revenue and Margins: Consolidated revenue increased by 1% year-on-year to ₹1,164 crores. However, EBITDA margins were soft at 12.78% due to lower realisation and losses in the Bathware division1.
•
Segment Performance:
◦
Tile segment grew by 3%, reaching ₹1,041 crores1.
◦
Bathware segment revenue grew by 2.5% to ₹95 crores1.
◦
Plywood revenue decreased to ₹8 crores, compared to ₹34 crores in the same quarter of the previous year1.
◦
Revenue from the new Adhesives division grew to ₹20 crores1.
◦
Sanitaryware revenue grew by 25% to ₹78 crores1.
•
Nepal Project: The Nepal project, commissioned in September 2024, operated at 70% utilisation in Q3 FY25 and is not yet included in the consolidated sales1…
•
Exports: Indian exports experienced a 16% fall in value during the first 8 months of the year due to increased ocean freight rates and market uncertainty1.
•
Working Capital: The working capital days were marginally higher at 59 days, compared to 58 days on March 31st, 20241.
•
Sales Mix: A higher proportion of sales came from projects this quarter, compared to retail, which is not typical for Kajaria, and this shift impacted realisation4…
Future Outlook:
•
Demand Improvement: The company expects a slight improvement in demand, influenced by the government’s budget, the RBI policy, and infrastructure investments9… A rate cut by the Reserve Bank of India is anticipated to help the housing sector10. The company expects that demand will improve in the first quarter of the next financial year10…
•
Retail Focus: Kajaria will continue to focus on the retail sector, which makes up 70-75% of their sales, as it provides better margins than projects4…
•
Margin Improvement: EBITDA margins are expected to improve with increased sales volume, operating leverage, and the stabilisation of the new sanitaryware plant12… Losses from the new sanitary plant are expected to decrease as production stabilises and the plant ramps up production13…
•
Price Realisation: The company is not expecting any price increases in the near term. They are focusing on improving the sales mix to increase realisation6…
•
Employee Costs: The company is working to reduce employee costs, and expects them to be at par with 23-24 levels in the next financial year18…
•
Distribution Network: Kajaria is expanding its distribution network, aiming to penetrate smaller towns to drive growth. They currently have 1,880 dealers across India, with 460 being exclusive14…
•
Nepal JV: The Nepal joint venture is expected to become a subsidiary starting April 1st, 2025, which will allow for more detailed financial reporting. The plant is currently operating at 70% capacity and is projected to reach 80-85% by the end of March. Interest rate reductions in Nepal are expected to significantly benefit the project’s profitability2…
•
No Change to Guidance: While a three-year guidance was previously given, the company will not revise this now, and will aim to meet the current guidance through efforts in the next two financial years22…
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Volume Growth: Kajaria expects an overall volume growth of 8-9% for the full year23.
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Capex: The company expects a low capex going forward as they are not planning any new capacity expansion. They intend to use their existing capacity and meet any additional demands through outsourcing25.
•
Market Share: Kajaria believes it is gaining market share from smaller players due to its balance sheet strength in the current environment of slow growth26.
Challenges:
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Competition: There is significant competition, especially in project sales5…
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Supply: Supply is currently high in the industry due to decreased exports which are being diverted to the domestic market, creating pressure on prices28…
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Freight Rates: Fluctuations in freight rates continue to impact export costs, though they have started to come down from their peak1…
•
Retail Demand: A lack of demand at the retail level remains a key challenge, impacting overall sales and margins4…
•
Plywood Slowdown: Reduced plywood sales due to high raw material prices have also impacted the business31.
In conclusion, Kajaria Ceramics is navigating a challenging market environment with a focus on improving retail sales, controlling costs, and optimising operations. The company anticipates improved performance in the coming quarters due to factors such as the stabilisation of the sanitaryware plant, potential government policies and rate cuts, and a focus on the retail sector.