Edelweiss Financial Services has a buy call on Kajaria Ceramics Ltd.
with a target price of Rs 690.
The current market price of Kajaria Ceramics Ltd.
is Rs 530.1.
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 8429.13 crore.Investment rationale by EdelweissKajaria Ceramics (KJC) reported yet another disappointing quarter muted revenue growth of 4% YoY and EBITDA margin contraction of 210bps to 16% due to higher fuel cost.
We acknowledge that our thesis of The Shift in favour of organised players has not played out as yet owing to delays in GST and weak E-way bill surveillance.
Hence, we revise down FY19/FY20E EPS 18%/23%, respectively.
However, we continue to maintain our thesis and reiterate our conviction that organised players will benefit on effective implementation of GST.
We believe, KJC, by virtue of being the market leader, strong cash flow generation and superior return ratios (RoCE of ~30%), will continue to enjoy premium valuation.
Reiterate BUY with revised TP of INR690 (30x FY20E EPS; INR900 earlier).Outlook and valuations: Long-term structural play; maintain BUYTo factor in weak FY18 performance and sustained margin pressure, we revise down FY19/20E EPS 18%/23%.
We believe, sustained market share gains aided by strongindustry drivers, GST implementation and structural shift from unorganised to organised players with healthy profitability matrix will bolster KJCs long-term growth.At CMP, the stock trades at 23x FY20E EPS.
We maintain BUY with revised target price of INR690 based on 30x FY20E EPS of INR23.