Buy Kajaria Ceramics, target Rs 500: Kotak Securities Limited

Kotak Securities has a buy call on Kajaria Ceramics with a target price of Rs 500.

The current market price of Kajaria Ceramics is Rs 340.

Time period given by the financial firm is one year when Kajaria Ceramics price can reach the defined target.


Valuation and recommendation by Kotak Securities:
The stock is currently trading at valuations of 22.4x and 19.0x P/E on FY19 and FY20 estimates respectively.

The challenges in the tile sector are likely to remain for another few quarters - lower realizations, higher gas prices are likely to have an adverse impact on projected financials as well as valuation multiples.

There is still continued higher proportion of unorganized sales even after implementation of GST and e-way Bill.

We revise our estimates to factor in slightly lower volumes and higher costs and arrive at a revised price target of Rs 500 based on 28x FY20 estimated earnings (Rs 551 earlier).

We believe, though the shift from unorganized to organized players post GST and e-way bill implementation has not happened to a large extent so far, but with improved compliance towards e-way bill implementation post elections, organized players like Kajaria Ceramics are likely to benefit with market-leading position and a wide offering of products.

We remain positive on the company and maintain BUY.
Kajaria Ceramics, incorporated in the year 1985, is a midcap company (having a market cap of Rs 5,404.31 crore) operating in the construction sector.