Buy Kajaria Ceramics: target of Rs 1200: Sharekhan

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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Sharekhan's research report on Kajaria Ceramics

Kajaria’s Q4 numbers lagged expectations led by muted tile volume growth and a steep rise in gas prices along with other raw materials weighing on OPM. The management guided for a 15-20% tile volume growth for FY2023 supported by completion of capacity expansions during April-May 2022 and sustained demand from real estate sector. OPM guidance reframed due to volatility in gas prices. The company withdrew a 5 MSM slab manufacturing capacity expansion plan at Gujarat. It would continue to undertake close to Rs. 300 crore of capex per annum over the next three years.

Outlook

We retain a Buy rating on Kajaria Ceramics with a revised PT of Rs. 1200, factoring downwardly revised estimates and believing recent correction factors in the rise in gas prices.

For all recommendations report, click here

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