Investment Strategy: Accumulate Kajaria Ceramics, Target Price: Rs 1323 - Prabhudas Lilladher Recommendation
Kajaria Ceramics: Prabhudas Lilladher Raises Earnings Estimates, Downgrades Rating to "Accumulate"
In a recent research report, Prabhudas Lilladher has revised upwards its earnings estimates for Kajaria Ceramics for fiscal years 2027 and 2028, while downgrading its rating to "Accumulate" from "BUY". The report highlights the company's improved EBITDA margins, which expanded sharply to approximately 19.2% year-over-year, driven by cost optimisation measures, improved operating efficiencies, better price realisations, and low-cost inventory.
The management has refrained from providing volume guidance for fiscal year 2027 and beyond, citing past deviations and external uncertainties. However, it expects to maintain EBITDA margins in the range of 18-19%. The company's revenue realisations improved quarter-over-quarter, as it passed on higher gas costs while maintaining pricing discipline. Price hikes of approximately 12-13% in the North and similar levels in South, along with 16-17% in Morbi, were implemented to offset higher gas costs, supporting realisation improvement.
Key Financial Highlights
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| Metric | FY26 | FY27E | FY28E |
|---|---|---|---|
| Revenue CAGR | - | 8.4% | - |
| EBITDA CAGR | - | 6.8% | - |
| PAT CAGR | - | 13.6% | - |
The company's working capital days improved by approximately 14 days to 51 days from December 25, driven by a reduction in inventory and receivables. Based on this analysis, Prabhudas Lilladher has considered a 5.0% CAGR in tiles volume over fiscal years 2026-2028, with a conservative EBITDA margin of 17.4% in fiscal year 2028.
Valuation and Recommendation
Prabhudas Lilladher values the stock at 33x March 2028 estimated earnings per share (EPS) to arrive at a revised target price of INR 1,323 (earlier INR 1,147). The report notes that the stock has given approximately 30% return post the Kajaria Management Meet update, leading to the downgrade to "Accumulate".
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Investor Takeaway
Accumulate Kajaria Ceramics with a target price of Rs 1323.
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