Buy Kajaria Ceramics, target Rs 635 : Religare Securities

Religare Broking has a buy call on Kajaria Ceramics Ltd. with a target price of Rs 635. The current market price of Kajaria Ceramics Ltd. is Rs 506.8 Time period given by the brokerage is a year when Kajaria Ceramics Ltd. price can reach defined target. Kajaria Ceramics Ltd., incorporated in 1985, is a midcap company with a market cap of Rs 8055.60 Crore) operating in Construction sector.

Investment rationale by Religare Broking

Kajaria Ceramics Ltd’s (KCL) Q4FY18 consolidated revenue growth of 4.1% YoY was more or less in line with our estimates, however, the company disappointed on the profit front. EBITDA de-grew by 8.2% with a 214bps YoY contraction in EBITDA margins, impacted by poor realization and higher operating expenses. PAT declined by 6.7% YoY, led by lower other income and higher depreciation cost. Notwithstanding 1-2 quarters of muted growth, we expect improved performance from KCL going ahead. The benefits of rationalization in GST rates on tiles and marble and implementation of E-way bill will start reflecting gradually in the coming quarters. Healthy industry outlook and company’s continued focus on capacity additions and enhanced product offerings should drive its revenue and profitability. We maintain Buy on the stock with revised target price of Rs 635.