Kajaria Ceramics Seen Reaching Rs 1147 by Prabhudas Lilladher

Kajaria Ceramics Expects Gradual Recovery in Q4FY26

Kajaria Ceramics (KJC) management has highlighted a gradual recovery in the fourth quarter of FY26, driven by a 7-8% volume growth. This growth is attributed to channel destocking and normalization of operations. Additionally, supply disruptions in Morbi, caused by gas issues and shutdowns, have created an opportunity for market share gains, aided by low dealer inventory and continued constraints in the region.

The company's management emphasized that gas price volatility remains a key monitorable, particularly for subsidiaries and outsourced volumes linked to Morbi. However, standalone operations of the company remain largely unaffected by this volatility. Kajaria Ceramics is expected to maintain stable margins at 17-18%, supported by pricing actions and cost-effective factors taken by the company.

Long-term Outlook for Kajaria Ceramics

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We remain positive on Kajaria Ceramics, driven by several factors. These include market share gains amid industry disruptions, a shift towards value-added products, strong brand and distribution, and margin resilience. However, near-term demand softness is expected to impact the company's performance.

Revenue and Earnings Growth Estimates

Our estimates for revenue, EBITDA, and PAT compound annual growth rate (CAGR) over FY26-28E are as follows:

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Outlook and Rating

We have considered a subdued demand environment and ongoing geopolitical uncertainties in our estimates, resulting in a ~5.0% CAGR over FY26-28E. Our earnings estimate for FY27E has been upward revised by 2.9%, while the estimate for FY28E remains unchanged. We maintain a 'BUY' rating with a revised DCF-based target price of Rs1,147 (Rs1,056 earlier).