Equity Research Report

Academic Research Project:- Not a Recommendation
Equity Research Report

Kajaria Ceramics Ltd
Milestone sales over 100msm.
About the company: Recommendation : xxx
CMP : INR 1265.25
Kajaria Ceramics Ltd. (hereinafter referred as “Kajaria Ceramics” or “ The
company” is an India’s largest ceramic/vitrified tiles manufacturing company Target price : xxx
and 8th largest in the world headquartered in Gurugram. The company was
incorporated in 1988 and its first plant was commissioned in Sikandarabad in Stock Data ( as on Feb 27, 2023 )
Uttar Pradesh. Nifty : 22149.0
The company has 7 manufacturing units in India. With an annual capacity of
86.47mn. sq. mts. Company offers more than 3000 Sku’s in ceramic wall & 52 Weeks H/L (INR) :1,524 / 1,006
floor tiles, vitrified tiles, designer tiles & much more. The company has a well- Market Cap (INR Crs.) : 20198
established dealer network with 1,800+ dealers, including a net addition of
O/s (Crs.) : 15.92
100+ dealers in FY23. It sells its products under 3 main brands i.e. Kajaria (for
tiles), Kerovit (for sanitaryware and bathware solutions) and Kajaria Ply (for Dividend Yield (%) : 0.72%
plywood and laminates). The Company launched the Italian Collection, a new NSE Code : KAJARIACER
value-added product range comprising 300 SKUs in multiple sizes in FY 2023.
Company accounts ~90% of its revenue from tiles segment and rest 10% from
sanitaryware, bathware & plywood. Relative stock performance – 1Y
New technology of pressing system (i.e. Continua and Roller Pressing
Technology) has been installed at Srikalahasti (Andhra Pradesh) plant of the Nifty Kajaria
company to make bigger size slab tiles. The Company’s R&D and technical
experts constantly visit international markets to identify and keep pace with
the latest technologies available. The Company has fully adopted the latest
technology available for producing tiles putting the Company in the same
league as other manufacturers in the Chinese and European markets.
On 3rd November 2022, a Joint Venture Company (`JVC') named Kajaria
Ramesh Tiles Limited was incorporated in Nepal.
Brief overview:
• The company has posted modest year-to-year growth of 6% ,
reaching 27.09msm.
• Despite the existing challenges in the tile industry company is Absolute Returns
maintaining a positive outlook for the demand in FY25, because of
1 Year : 18.27%
rub-off in strong real estate demand which can act as a catalyst for
improvement in demand for tile industry. 2 Year : 34.42%
• The installation of new kiln and new technology of pressing system 3 Year : 136.19%
which will not only enable to produce bigger sized ceramics tiles,
but also result in saving in fuel consumption as the new kilns are
more energy efficient.
Shareholding pattern ( as on Dec, 2023 )
• Additionally also the reduced gas prices all these can help further Promoter : 47.5%
to improve the targeted ROCE of 22% . FII : 18.5%
• The stock currently trades at P/E of 49x . With increase in EPS to
31and P/E to 39. DII : 25.5%
Public : 8.7%
Key Highlights:
Financial Summary
• Topline growth of 18.26% on YoY basis was achieved for FY23 and growth
In INR Crs. FY23 FY24E FY25E
of 5.59% on QoQ basis in Q3FY24.
• Ongoing challenges in the domestic tile market as the demand continues Net Revenue 4382 4864.0 5525.5
to remain weak, the company has revised its volume guidance from 13%- YoY growth % 18.26% 11% 13.6%
15% to 9%-10% FY24. EBITDA 593 778.2 907.7
• The company has given guidance on consolidated capex of INR 370 crores
in FY24. EBITDA % 13.5% 16.0% 16.4%
• The company indicated that greenfield expansion in Nepal of 5.1MSM has PAT 346 479 574
been delayed due to unfavorable weather and is now expected to PAT % 7.9% 9.9% 10.4%
commission by June, 2024.
• The company has planned to acquire 100% stake for an investment of ₹
ROE 15.6% 20.1% 21.3%
30 crore in Kajaria Ultima Private Limited (KUPL), through which it plans EPS (in INR) 21.6 31.0 38.0
to purchase a land in Morbi to setup a GVT manufacturing plant later EV/EBITDA 28.1 x 24.3 x 20.1 x
• It has also planned to acquire 90% stake for an investment of ₹ 50 crore in
Keronite Tiles Private Limited (KTPL), which has a GVT plant with a
capacity of 6 MSM. The plant is currently undergoing Prepared by: Yash Jain
maintenance/machinery upgrade and is expected to resume operations in Guided by: CA Parth Verma, ( The Valuation School)
April, 2024.
Global GDP Projections (%)

Global Economy:
The global economy witnessed a rocky ride in the past 2 years, 0.50% 2.50% 4.50% 6.50% 8.50%
while most of the country witnessed a sharp recovery post COVID.
CY22 was a challenging year for the global economy because of World
high inflation, higher cost of living , food and energy crisis &
disruption in trade and supply chain especially for the western Advanced Economies
countries because of ongoing conflict between Russia & Ukraine.
While central banks across the globe were fighting with inflation by
Emerging Economies
rate hikes. The recent conflict between Israel and Gaza could pose
more hurdles in energy cost and supply chain.
Due to above issues, the advanced economies grew at slower pace USA
of 2.7% as against 5.0% in CY21. While emerging and developing
economies posted a growth of 4.5% as against 6.5% in CY22. China
But according to current data the global economy recovery is
proving to be surprisingly resilient . Inflation is falling faster than India
expected from its CY22 peak, because major central banks raised
policy interest rates to restrictive levels in CY23 resulting in higher Japan
financing costs. Further inflation is expected to fall from an
estimated 6.8 percent in 2023 (annual average) to 5.8 percent in
UK
CY24 and 4.4 percent in CY25.
For advanced economies, growth is projected to decline slightly
from 1.6 percent in 2023 to 1.5 percent in 2024 before rising to 1.8 Euro Area
percent in CY25.
For emerging market and developing economies, growth is
expected to remain at 4.1 percent in CY24 and to rise to 4.2 percent 2023 2024P 2025P
in CY25.
Source: IMF WEO, Company Analysis Source: IMF WEO
India vs Global GDP Growth (%) Indian Economy:

India has now become an established player in the global economy,
10.00% 7.20% witnessing the excellent economic growth for the two consecutive
6.80% 6.50% 6.50% 6.30% years, were it surpassed the UK to become the 5th largest economy.
5.00% 3.90% India has posted growth of 7.2% in FY23 which was above the global
average of 3.5%.
0.00% The ripple-down effects of the Russia-Ukraine war and other GPR
2018 2019 2020 2021 2022 2023 2024P (Geo-Political Risk) factors escalated oil and gas prices and overall
-5.00% inflation. However, RBI's intervention through interest rate hikes
tamed inflation to 5.7% in March FY23 (below RBI upper tolerance
-5.80%
-10.00%
limit of 6%) bringing the average inflation for FY23 to 6.7%.
The strong growth in tax collection reflects improved business
India Global performance in the country amid external headwinds. The revenue
Collected from the Goods and Services Tax (GST) for March FY23
Source: IMF WEO, World Bank, RBI. increased by 13% to reach 1.60 Lakh Crores. This mop-up can be
attributed to various factors, including the Government's efforts to
India GDP Quarterly growth Actual vs Projected improve tax compliance and the revival of economic activity.
India's economy is expected to grow in the range of 6.0-6.5% in
15.20%
FY24 supported by strong domestic drivers and robust capex

13.50%
16.00%
momentum of the government. Though elevated interest costs,
14.00% high inflation, and persisting global risks could interrupt this growth
12.00% momentum, India is still expected to continue to be among the
8.40%
8.40%
fastest-growing economies
7.80%
7.70%
10.00%
India's strong economic growth and socio- political stability has
6.30%
6.20%
6.10%
6.00%
5.40%
8.00% turned it into a favored destination for foreign direct investment

4.60%
4.60%
4.40%
4.10%
4.00%
6.00% (FDI).This is evidenced by the highest-ever gross FDI inflows of USD

4.00%
84.57 Billion in FY21-FY22.However, in the year FY22-23, the gross
inflows of FDI dropped to USD 71 Billion. This drop in inflows is
2.00%
attributed to the policy changes of the US Federal Reserve and the
ongoing Russia-Ukraine crisis.
Indian economy is robustly progressing over becoming 3rd largest
Actual Projected economy with Prepared by: Yash Jain
$5tn. GDP.
Source: IMF WEO, RBI, Company Analysis

Source: IMF WEO, World Bank, RBI.
Indian Real estate sector: Market size of Real estate industry (USD bn.)
The real estate sector has an entirely new approach now that the 1200
1000
pandemic is over. The epidemic has brought back the significance of 1000
owning a home and the mindset of Customer preferences for
residential houses have changed significantly. A few of the new 800
650
trends include a preference for larger flats, a tendency to work with 600
trustworthy developers, and an increase in the number of township
400
projects being developed.
180
With all-time high sales, fiscal 2023 was a historic year for the Indian 200 120
50
real estate market. Building on a strong base set in the fiscal year
0
2022, the industry demonstrated robust growth. It is anticipated
2008 2017 2020 2025F 2030F
that the demand upturn that was observed in the second part of
fiscal 2021 will continue into fiscal 2023 and 2024. Along with the
rising number of launches, which reached a decadal high last year, Changing trend in housing demand in India
inventories in Tier-1 cities is also declining or remaining stable, 120%
suggesting a strong demand trend. 100%
The commercial office sector is still struggling and demand hasn't 16% 18% 20% 21% 27% 30%
80%
returned to pre-pandemic levels, despite the residential segment 30% 33% 35%
seeing impressive growth. The rise in remote work and the 60% 37%
36% 38%
deceleration in worldwide economic expansion have posed 40%
obstacles to the need for office space. The biggest user of office 54%
20% 48% 45% 42%
space in India, IT/ITeS, is one of the sectors that is directly impacted 37% 32%
by the global recession. However, with consumption rising above 0%
pre-pandemic levels, the retail real estate market is back up and 2018 2019 2020 2021 2022 2023
running and should keep up the momentum. <5000000 5000000-10000000 10000000>
Source: Company Analysis Source: Knight Frank report vision 2047
Budget 2023-Takeaways:
The union budget presented this year was supportive of the long-
Pradhan Mantri Avas Yojna expenditure data term growth of the real estate sector in India through its focus on
(INR Crores.) urban infrastructure and the digital economy. The Government’s
rising focus on infrastructure capex will create a backdrop of
opportunity for the real estate sector. Some of the key measures
2024-25F 80670 include:
Housing for All:
The Government allocated ₹79,000 Crore, 66% higher than last
2023-24 54103
year’s allocation, under the Pradhan Mantri Awas Yojna (PMAY)
initiative which will be used for both urban and rural markets. The
2022-23 73614 government plans to complete its target of over 4 Crore houses
across both urban and rural markets, which will be allocated to
persons eligible under the scheme. In addition, it plans to make the
2021-22 47389 land and construction approval process more efficient.
Urban Development Plan:
The Real estate sector is expected to benefit from emphasis laid on
2020-21 40259
development and urban planning in Tier 2 and Tier 3 cities in the
budget. The National Housing Bank (NHB) will oversee the proposed
2019-20 24963 Urban Infrastructure Development Fund (UIDF). This will help public
agencies develop infrastructure in Tier 2 and Tier 3 cities. A ₹10,000
0 20000 40000 60000 80000 100000
crore budget has been proposed for this fund.
Furthermore, five centres of excellence for urban planning have
been proposed, which will provide the sector with a channel to hire
trained professionals. A committee of urban planners, economists,
and institutions will be formed to make recommendations on urban
sector policies, capacity building, planning, implementation, and
governance
Prepared by: Yash Jain
Source: GOI,Company analysis. Source: Crisil rating report, Company Analysis

Global Tiles Industry:

The current size of global ceramics tiles market is USD383.1 bn.
and it is estimated to reach USD663.2bn. by 2030 with CAGR
growth rate of 7.1% during period from 2022-2030, This growth will
be driven by several growth factors such as rapid infrastructure
development, growth in building industry, urbanization, population Market Size of global tiles industry (USD bn.)
growth, and the attractiveness and durability of ceramic tiles. The 700
Asia Pacific region accounts for a significant share of global ceramic 619.2
tile production, with China holding the prominent position of the 600 578.2
largest manufacturer of ceramic tiles worldwide. Following China, 539.8
504.0
India is also a major player in the global ceramic tiles manufacturing 500 470.6
industry. 439.4
410.3
In 2023, The Italian ceramic tile industry reported highly negative 383.1
400
results in 2023 amid a global economic slowdown that led to a sharp
contraction in demand across all continents. Total tile sales fell to
300
362 million sqm (down 19.3% from 2022) and production dropped
by 90 million sqm. Although almost all the largest tile producer,
consumer and exporter have been affected by the negative trend , 200
China has been by far the worst hit. In 2022, the country
experienced a 1.55 billion sqm drop in production to 7.3 billion sqm 100
and an almost equivalent decline in domestic consumption to 6.7
billion sqm, further widening the gap with respect to the country's 0
enormous installed capacity (12.56 billion sqm). Exports also 2023A 2024F 2025F 2026F 2027F 2028F 2029F 2030F
declined for the ninth consecutive year.
Inflation, energy crisis and cooling of demand following post-
pandemic boom are all factors that affected the performance of the
industry and market.
Source: Ceramic worldweb, Company Analysis Source: Company analysis
Market size of Indian tiles industry (Rs bn.) Indian Tiles industry:
The Indian tiles market size has witnessed a growth of CAGR 17%
for last 5 years from Rs270bn in 2018 to Rs595bn in 2023, and
500 445
further we expect industry to grow at 8%-9% for FY24/FY25 and
385
414 CAGR growth can be estimated at 8.5%-10% for 4 years up to 2027.
400 372 364
357 339 This growth is reinforced by several key factors. Firstly, the
315 advancement in real estate sector because according to Knight
275
300 234 Frank report estimations, by 2047 Indian real sector is expected to
216 223 213 222 238
200
expand to USD5.8tn contributing 15.5% to the total economic
103
output & as per analysis 1% growth in real estate development
63 67 78 contributes to around 8% growth in allied industries like steel,
100 54
cement, building material, etc. & along with government initiatives
0 like ' Pradhan mantri Awas Yojna ' (Prime Minister's housing
2018A 2019A 2020A 2021A 2022A 2023A 2024F 2025F 2026F 2027F
Scheme) & government insistance on creating world class
Unorganized Organized infrastructure are expected to provide additional boost for the
industry.
Some of the other key growth drivers for the tiles industry are rising
disposable income , Per Capita Income(PCI) rapid urbanization and
Export volume(MSM)
development in Indian railways ,Airports construction & renovation
700 projects.
608
The ceramic tiles sector in India has witnessed impressive export
600
483 487 growth over the period of 2012 to 2021.Currently, the export share
500 437 of the Indian tiles industry is estimated to be around 25% of the
400 359 total production. With the ongoing growth trajectory, it is expected
274 to surpass 30% in the near future. The Indian tiles industry primarily
300 228
186 exports around 56% to the Asian market, with the Gulf Cooperation
200 122 Council (GCC) countries being the main market
100 Also due to GST ,sector is witnessing a bit of shift from unorganized
0 to organized sector, which will act as a catalyst for the future
2015 2016 2017 2018 2019 2020 2021 2022 2023 growth in this sector.
Prepared by: Yash Jain
Source: Company analysis. Source: Ceramic worldweb, Company Analysis

Indian Tiles industry:
❑ Morbi Cluster:
The Morbi Cluster, Gujarat holds a prominent position in the ceramic industry, being recognized as the largest tiles production cluster in
India and the second largest tiles cluster globally. It serves as the base for numerous organized players within the Indian market. A
significant proportion, approximately 95%, of the ceramics tile production in India is attributed to this cluster. It boasts a substantial
presence with over 800 Indian ceramic tile companies operating within its vicinity. The cluster’s size, concentration of manufacturers, and
dominance in the Indian market contribute to its significance and influence in the ceramic tile industry.
During FY21-22, several production units within the Morbi Cluster faced significant challenges and had to cease operations. These
shutdowns were primarily caused by increased energy costs, higher freight expenses, a surge in price war, inventory build-up, and a
shortage of containers. These factors collectively impacted the operational viability of many production units, leading to their temporary
shutdown.
Despite the aforementioned short-term challenges, the Morbi Cluster remains a significant player in the global tiles market. The cluster
demonstrated its resilience during a challenging period when the Saudi market, an important export market, imposed anti-dumping duties
on Indian tiles. Nevertheless, the Cluster effectively managed to mitigate this risk by diversifying its export destinations. It proactively
explored and expanded its exports to countries such as the United States, Thailand, Brazil, Mexico, and other nations within the GCC (Gulf
Cooperation Council). This strategic maneuver enabled the cluster to access new markets, reducing its dependence on any single market
and ensuring its continued presence and competitiveness in the global tiles market.
❑ Growth Drivers:
➢ Make in India and other Government Schemes :

The Government of India has launched several programs which are helping tile industry to grow and flourish. Building of toilets to
eliminate the open defecation in the country, under the Swachh Bharat Mission in urban and rural areas has successfully boost the
ceramic tile industry with high growth in demand of small size tiles.
➢ Urbanization :
Rapid urbanization is the main key factor that will drive the growth of the tile manufacturing industry in India. The cities are continuously
expanding with significant investments being made in housing, shopping malls, hospitality, and other sectors. Moreover, the introduction
of smart city projects by the Indian Government will propel the growth rate in future markets.
➢ Home Extension and Home Improvement Needs :

There is a significant need for bigger and better homes in India as ~41% of households live in smaller than one-room homes and only 53%
households are in a good condition. This huge scope for home extension and home improvement in turn presents significant growth
opportunities for the ceramic tiles and sanitaryware industry.
➢ Evolution of Large Format Tiles and Slabs :

Globally, consumer preference is shifting from Double Charge tiles to large format GVT and Porcelain slabs. The same trend is gradually
gaining traction in India. Several players are launching new format tiles with modern designs and thicknesses, inspired by innovation of
glazing and digital printing technologies. These products are aimed at capturing export market as well cater to the slowly growing
domestic demand for these novel products. Large format tiles and slabs are increasingly being used as countertops, kitchen tops,
floorings, facades, wall cladding, etc.
➢ Emergence of new trends :

Emerging tile trends will boost the growth of the tile manufacturing industry in India like printed ceramic tiles, germfree tiles, 3D tiles,
and visually stimulating mosaic tiles. Digitally printed tiles are becoming a popular choice of consumers because they provide ways to
improve the aesthetic appeal of a house or office space. Similarly, customers are becoming hygiene conscious and they prefer germ-free
tiles.
➢ Anti-China Sentiment :
The central government has imposed a definitive anti-dumping duty of USD 2.05 per sq. mtr. on luxury vinyl tiles imports from China and
USD 1.44 per sq. mtr. on imports from Taiwan based on the recommendations of the Commerce Ministry to benefit the local tile
manufacturers. The anti-dumping duty would be valid for five years.
➢ Low per Capita Consumption:

Per capita consumption of tiles in India is 0.6 sq. mtrs. This is significantly lower as compared to 4.0 sq. in China and 3.4 sq. mtrs in Brazil.
India’s per capita tile consumption is less than half of the world average of 1.4 sq. mtrs. This is indicative of huge scope of growth for the
Indian tile industry.
Source: Company analysis.
❑ Risk factors:
➢ Market Dependency risks:

Industry is dependent on the performance of the real estate, infrastructure and other related industries where our products are
utilized. Uncertainty regarding the real estate market, infrastructure sector, economic conditions and other factors beyond entity’s
control could adversely affect demand for company’s products, and their costs of doing business and their financial performance.
➢ Increase in gas prices:

Gas prices had started to increase post 1QFY22 and consumption cost of the company had seen a cumulative increase of 85%+
during 1QFY22-2QFY23 which also led to gross margin decline of 8.7pp in this period (33.3% in 2QFY23 v/s 42% in 1QFY22). There
has been softness in gas prices post 2QFY23 and average gas consumption cost for the company fell to INR46/scm in 4QFY23.
Higher-than expected gas prices can put pressure on Kajaria ceramic's margins.
➢ Competition from unorganized players:

The industry segments in which Kajaria ceramics operate being fragmented, they face competition from other players, which may
affect their business operations and financial conditions.
During the last few years, unorganized players have shifted to exports (which reported a 23% CAGR over FY18-23 in value terms). A
slowdown in exports can force unorganized players to shift their focus into domestic markets. This can lead to pressure on tiles
prices.
➢ Labour disruption risk:

The industry in which Kajaria ceramics operate is labour intensive and their manufacturing operations may be materially adversely
affected by strikes, work stoppages or increased wage demands by their employees or those of their suppliers.
➢ Maintaining relationship with outsourcing partners:

Forming joint venture as well as sourcing from third parties is evolving as a trend among large players since capacity is available
quickly at lower overheads. However, maintaining good relations with JV partners and third-party sourcing players, in particular, can
be a challenge.
Market share: Natural gas Price (In USD)

40% 9 8.2
8 7.2
7 6.3
6
5
3.5
4 2.6
2.4 2.6
3 2.1
60% 1.7
2
1
Organized Unorganized 0
100
Production capacities
80
28
60 22 19 24 21 21
28 27
40 23
46 49 49 49 49 54
20 41 42
31
0
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
Own Capacity(MSM) JV Capacities (MSM)

❑ Synopsis on Kajaria’s Bathware & Plywood segment:
Kajaria ceramics diversified its revenue stream by entering into Bathware (in FY15) and Plywood segments (in FY19). The
management believes that tiles, sanitaryware and faucets are complementary products, positioned as bathroom solutions; hence,
they are sold in the same store pan-India.
Kajaria ceramics entered the sanitaryware and faucet verticals through its subsidiary Kajaria Bathware Pvt Ltd (Kajaria ceramics holds
85% stake and balance 15% is owned by Aravali Investment Holdings, Mauritius, a wholly-owned subsidiary of West Bridge Crossover
Fund, LLC.).
The company commissioned a 0.54m pieces Sanitaryware plant at Morbi, Gujarat in May’14 (current capacity – 0.75m pieces) and a
1m piece faucet plant at Gailpur, Rajasthan (started commercial production in Jul’15). Revenue of the Bathware segment stood at
INR3.2b in FY23 (7.2% of total revenue). This segment turned profitable in FY21.
Kajaria ceramics entered into the Plywood segment in FY19 through its subsidiary, Kajaria Plywood Pvt. Ltd. This segment is based on
an outsourcing model. Kajaria ceramics offers plywood, blockboards and flush doors through this segment. Kajaria Plywood
generated revenue of INR773m in FY23 (1.8% of total revenues).
New initiatives and launches in the Bathware and Plywood segments

Sanitaryware and Faucets Plywood
250SKUs, 15 different product lines. Launched aesthetically and
functionally superior products. 300 dealers dedicated for these
FY18 products.
Launched its products in the West and South regions v 12
Launched the single piece toilet and smart WC at a competitive price. products in six different sub-brands (Platinum, Gold Maxx,
FY19 Launched four new product ranges in Faucets (each having 20 SKUs). Gold, Silver, Pro-710 & Pro-Build).
Commissioned second furnace which increased sanitaryware capacity Commenced marketing and distribution in the East region v
by 25%.Introduced rain showers to enhance product range. Focused on Entered the Flush door segment with four retail level
marketing value-added products such as Smart Series and the sensor- subbrands (Premier, Select, Superior and Classic) to widen
FY20 based touch-free ranges. its portfolio.
Launched an exclusive Aurum collection, to be displayed

at Kerovit showrooms. Launched the Super 710+ variant, a hardwood product in
Took control of the Customer Relationship Management select markets.
under its fold which earlier was managed though a Introduced digitally printed variants in the affordable Pro
FY21 franchisee. Series (Pro 710 and Pro Build/
Added two new ranges to its exclusive Aurum collection

aimed at the well-heeled customers. Forayed into decorative laminates segment
Engaged Ranveer Singh as the brand ambassador of Opened laminates display centers in select markets at
FY22 Kerovit brand in addition to Anushka Sharma. dealers end to showcase the range of products.
Kajaria’s revenue breakup segment wise

1.80%
7.60% 2.10%
89.10%
Tiles Sanitarware Plywood Adhesives

❑ Manufacturing facilities
Exhibit 1:
Ceramics Tiles Polished Vitrified Glazed vitrified tiles Total Sanitaryware(Lakh Faucets(Lakh
Plants (MSM) tiles(PVT) (MSM) (GVT) (MSM) (MSM) pic) pic)
Sikandarabad (UP) 0 0 11 11 0 0
gailpur (RJ) 31.32 0 9.1 40.42 0 16
Malootana (RJ) 0 6.5 0 6.5 0 0
Shrikalahasti (AP) 0 0 8.8 8.8 0 0
Balangar (TEL) 4.75 0 0 4.75 0 0
Morbi (GJ) 2 plants 0 8.9 5.7 14.6 7.5 0
Total 36.07 15.4 34.6 86.07 7.5 16
❑ Strong pan India distribution network:
Kajaria ceramics has a strong pan-India distribution network comprising 1,840 dealers as of Mar’23 (v/s 750 dealers in FY12,
CAGR of 7% over FY12-23) with a reach of 15,000+ retail touch points, among the largest in the Indian tile industry. The
company targets to increase dealer count by ~450 in the next three years (addition of 150 dealers every year). Increasing
distribution rapidly is a key to capitalize on the brand’s growing awareness.
Additionally, Kajaria ceramics has created 400 exclusive showrooms across India (50 showrooms opened in one year) to
improve visibility.
Exhibit 2:
Exhibit 3:
No. of dealers (unit)

Sales Break up(%)
2500
2100
1840
30%
1700
2000
1570
1500
1450
1400
1500
1100
950
1000 70%
750
500
Institutional Retail
0
FY12 FY15 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY25
❑ Focus on retail sales:
Kajaria ceramics has always focused on developing its brand and distribution presence to capture the more lucrative retail-end of
the market effectively. Thus, its retail-to institutional sales mix is about 70:30 versus 50:50 for the industry. Retail enables a more
effective pass-on of higher input costs (thereby boosting margins) v/s institutional sales. The institutional segment is more
competitive than retail as discounts are offered on bulk sales.

Quarterly result Analysis – Q3FY24 and Q2FY24:
❑ Financial Performance: ❑ Costs and Pricing:

• Consolidated revenue for Q3 FY24 and Q2 FY24 was • Gas cost average of Rs.38 in Q2, expected to remain similar
INR1152 Crs. and INR1122 Crs. with an increase of 6% and in the second half.
4% respectively. • No major pricing actions in Q2, no changes expected in Q3.
• EBITDA margin for Q3 FY24 and Q2 FY24 is 15.52% and • Employee cost increase due to provision of increment in
15.95% ,with an increase of 332 basis points and 398 basis Q2, similar cost expected in Q3 and Q4.
points respectively as compared to same quarter last year. • Gas prices linked to Brent, expected to remain similar in Q3
• PAT for Q3 FY24 and Q2FY24 was 108 Crs. and 111 Crs with with a slight increase.
an increase of 45% and 60% respectively. • No major changes in pricing and discounting trends
• Working capital days increased to 60 days as of December expected in Q3.
2023 from 53 days in September 2023.
❑ Operational Efficiency:
❑ Segment Performance: • Fuel mix includes 30% biofuel for North plants.
• Tile segment revenue for Q3 FY24 grew by 3%. • Advertising expenditure to remain around 3% of revenue.
• Bath ware segment revenue for Q3 FY24 and Q2 FY24 grew • Sales force automation and dealer management system to
by 16% and 15% respectively. enhance efficiency.
• Plywood segment revenue for Q3 FY24 and Q2 FY24 grew • Mix of outsourcing and capacity expansion planned based
by 81% and 21% respectively. on market conditions.
• Adhesive segment revenue for Q3 FY24 and Q2 FY24 grew
by 42% and 35% respectively. ❑ Guidance and Future plans:
• Revised volume growth guidance of 9% to 10% for the full
❑ Expansion and Acquisitions: year.
• Successful commissioning of the Sikandrabad and Gailpur • Bath ware segment expected to grow by 20%+ in value for
modernization cum expansion projects. the entire year.
• Focus on expanding reach in smaller towns and introducing • Capex guidance of Rs.370 Crores for FY2023-FY2024,
innovative products. Rs.200-250 Crores for the next three years.
• Export showroom openings in Dubai and London to • Advertising expenses expected to be Rs.130-140 Crores for
increase export sales. the full year.
• Focus on investing in the plywood business due to growth • Diversification into plywood and adhesives part of strategic
opportunities. growth plan.
• Progress on Nepal project slightly delayed due to heavy • Focus on value-added products to increase realization per
rainfall in the last quarter, 5.1 million sqm capacity square meter.
expected by June 24. • Ultima expansion plans to be shared in the next quarter
• Acquisition of plywood plant in North India to enhance meeting.
business stability in supplies and quality.
• Acquired plant in Morbi with an investment of INR50 Crs. ❑ Export and Distribution:
and with production capacity of 6MSM, to boost • Exports impacted by high freight rates, transit time, and
production and sales from this plant will start from April reduced availability of shipping.
2024. • Adhesives distributed through existing dealers and new
• Land bought with an investment of INR30 Crs. for large team from the market.
format tiles for future expansion to cater both export and • Plywood distribution network separate from tile dealers.
domestic market, Factory would be set up here in next 15-
18 months.
❑ Market Outlook:
• Industry experiencing tough times due to factors like gas
price increase and export slowdown.
• Kajaria aiming to grow 5-6% more than industry in FY25,
expecting EBITDA margin of 15-17%.
• Industry growth expected to improve in next three years.
• Government projects in education, health, railways, and
airports are driving demand.
• Positive outlook for future demand with broad-based
demand scenario.
• Expect a favourable shift in demand driven by growth in
the real estate sector.
• India's tile exports grew 25% in FY2023 and expected to
reach Rs.20000-21000 Crores in FY2024.
• Positive outlook for the Indian tile exports market due to
competitive gas prices. Source: Company analysis.
Management Analysis
Leadership
Below are the details and experience of management:

Sr.No. Name Designation Qualification Profiling Experience
Mr. Ashok Kajaria is the founding Chairman & Managing Director of the
Company, He is widely credited with spearheading a transformation of the
Bachelors in
tile industry in India and is best known for being the pioneer behind
Science (B.Sc.)
Chairman & launching large format wall tiles in the country and his catalytic role in
Mr. Ashok and Engineering
1 Managing revolutionizing tile display and marketing. Mr. Kajaria has held several 47 years
Kajaria from (BSME) at
Director important industry positions including President of PHD Chamber of
UCLA (California),
Commerce, Chairman of the Indian Council of Ceramic Tile and
USA.
Sanitaryware and member of the executive committee of Federation of
Indian Chamber of Commerce and Industry.
Mr. Chetan Kajaria is the Chairman of the Indian Council of Ceramic Tiles
and Sanitaryware (‘ICCTAS’).He started his journey at Kajaria Ceramics
Limited in the year 2000 and has been instrumental in giving a new
dimension to the Company by opening international standard tile
Bachelor in Petro showrooms across the country which has today become an industry trend.
Chemical Mr. Kajaria is spearheading the ceramic tile vertical. He is responsible for
Engineering (B.E.) the first ever acquisition in the Company’s history- acquiring a ceramic tile
Joint
Mr. Chetan from Pune plant in Gujarat for feeding the Western and Southern markets in February
2 Managing 23 years
Kajaria University and 2011.He spread the concept of value added tiles in the ceramic tile vertical
Director
holds an MBA using digital technology from Spain by displaying at dealers’ showroom
from Boston across the country. He had also led the acquisition of a ceramic tile plant in
College, U.S.A. Vijayawada, Andhra Pradesh in April 2012, marking the Company’s entry
into the growing markets of South India. He has played a key role in making
Kajaria Ceramics Limited a leading manufacturer of ceramic wall & floor
tiles in India. He successfully contoured the Group’s presence into the
plywood space by adopting an asset-light operating model.
Mr. Rishi Kajaria joined Kajaria Ceramics in the year 2003 and spearheads
the vitrified tile vertical. Initially, he opted for trading vitrified tiles rather
than joining the race of setting up capacities. After importing for 5 years,
he decided to manufacture them. The first production unit for vitrified tile
B.Sc. in Business was started in Sikandrabad in 2010. Subsequently, Kajaria Ceramics
Joint
Administration commissioned a huge expansion of vitrified tiles at Gailpur in 2011. The
3 Mr. Rishi Kajaria Managing 19 years
from Boston next capacity addition came through joint ventures in Morbi, Gujarat. With
Director
University, U.S.A. this strategy, he added capacity without any gestation period and acquired
reach.Mr. Kajaria identified the opportunity in the Bathware segment and
started Kajaria Bathware. He is also responsible for spearheading the
lateral shift of the company into Sanitaryware and faucets in keeping with
the overall growth master plan.
Mr. Dev Datt Rishi is an eminent technical professional having experience
in a wide spectrum of industries like Chemicals, Fertilizers, Pesticides and
Ceramics. He was associated with Kajaria Ceramics since inception in
B.Sc. January 1987 when the first tile plant was conceived at Sikandrabad. For
(Engineering) more than 20 years, he managed all operations meticulously. He has rich
Non-
Mr. Dev Datt Chemical Hons. experience in the field of production, quality control, R&D, technology
4 Executive 30 years +
Rishi graduate with a transfer, standardization, projects, training and organization development,
Director
Diploma in etc. He was on the Board of the Company w.e.f. 14th May, 1993 and
Management. resigned on 30th April 2010. He was again appointed on the Board w.e.f.
14th January 2015 as Director-Technical and resigned from the post of
‘Director-Technical’ of the Company and continues to be Non-Executive
Director of the Company effective from 1st July, 2017.

Management Analysis
Independent Directors:
Mr. Raj Kumar Bhargava is a retired IAS officer. He is an Independent

Director and joined the Board of the Company on 9th November, 1998. He
Non- is the Chairman of the Audit Committee of the Company. He has served as
Executive- Industry Secretary, Finance Secretary, Irrigation & Power Secretary and
Mr. Raj Kumar B.A. (Hon.) and
5 Director Chief Secretary in U.P. He has also served Government of India as Jt. 30 years +
Bhargava M.A.
&Independen Secretary Petroleum, Jt. Secretary Industries, Secretary Home and
t Director Secretary Urban Development. He has wide experience in industry,
finance and infrastructure. He is holding Directorships in various other
public limited companies.
Mr. Debi Prasad Bagchi, retired as Chief Secretary to the Government of

Non-
MA (Economics) Orissa. He had served the Government of India as JS, AS and Secretary. He
Executive-
Mr. Debi Prasad and M.Phil. in is an Independent Director and joined the Board of the Company on 29th
6 Director 20 years+
Bagchi Public June, 2007. He has rich experience in General Administration,
&Independen
Administration. Management Strategy, Government Industry Relationship and Corporate
t Director
Governance.
Mr. H. Rathnakar Hegde is an Independent Director and joined the Board

of Directors of the Company on 17th January 2012.He has served the
Non- banking industry for four decades. His most recent position was as the
Executive- Executive Director of the Oriental Bank of Commerce (‘OBC’), a premier
Mr. H. Rathnakar B.Sc. Science
7 Director public sector bank in India. Mr. Hegde assumed his responsibilities at OBC 30 years +
Hegde Graduate
&Independen on 16th May, 2008. Prior to this, Mr. Hegde held the position of General
t Director Manager (Credit, Human Resource, Treasury, and Marketing) at Vijaya
Bank that was the culmination of 38 years of exemplary service in various
capacities. He also serves on the Boards of several companies
Mrs. Sushmita Singha, has over 30 years of experience in the industry,

international organizations and development sector. She has a Diploma in
Urban Town Planning from the Human Settlement Management Institute
(HSMI), New Delhi and a Certification Course in Enhancement of
Non- Managerial Capability from the Indian Institute of Management (IIM),
Executive- post graduate in Lucknow. She is an Independent Director and joined the Board of the
Mrs. Sushmita
8 Director English from Company on 30th March, 2015. She has held various posts / assignments 30 years
Singha
&Independen Patna University in various organizations including PHD Chamber of Commerce and
t Director Industry, Sulabh International Social Service Organization, UN Task Force
and took various assignments for Government of India. Presently she is
Director & CEO of Aculina Solutions. She is also an honorary member of
BRICS Chamber of Commerce and serves on the Boards of other
companies.

Management Analysis
Independent Directors:
He is a retired IAS officer and he has wide experience in the academics,

bureaucracy, management & industry. He served as the Secretary of the
Ministry of Tourism/Ministry of Minority Affairs of Govt. of India and also
with the Govt. of Rajasthan including Vice Chancellor, Rajasthan ILD Skills
University, Jaipur r (Rajasthan), Chairman of Rajasthan Public Service
Non- Commission, Secretary of the Department of Education/ Department of
Executive- Urban Development and housing/ Department of Mines and Petroleum /
Dr. Lalit Kumar Ph.D. in Tourism,
9 Director Department of Labor and Employment and Secretary to the Chief Minister 25 years+
Panwar M.Sc. And B.Sc.
&Independen of Rajasthan. He also served as the Commissioner and District Magistrate
t Director in the Rajasthan. At present he is a member of important and prestigious
'Lokpal Search and Selection Committee' of Govt. of India, being chaired by
Justice Sanjana Desai, Ex.-Judge of Supreme Court of India. He is so a
member of Niti Aayog's Tourism Advisory Committee. Presently, his
involvement is also with Vivekananda Global University, Jaipur (Rajasthan)
as the Chairperson & Chancellor.
He is an Indian Administrative Officer of the 1979 batch belonging to the
Rajasthan Cadre. He superannuated as Secretary o the Government of
India (Ministry of Social Justice and Empowerment) after a career of almost
four decades in public service both at the State and National level in
Non-
various sectors including Petroleum and Natural Gas, Fertilizers, Textiles,
Executive- Master in Public
Mr. Sudhir Health, Education and Banking. On the basis of his exemplary public
10 Director Administration, 30 years+
Bhargava service, the Hon'ble President of India appointed him as an Information
&Independen M.Sc. and B.Sc.
Commissioner, Central information Commission in June 2015, on the
t Director
recommendation of a Committee headed by the Hon'ble Prime Minister. In
January 2019, he was appointed by the Hon'ble President of India as the
Chief Information Commissioner. He has also served on the Board of
thirteen companies including a multinational company.
Commentary:
The company has strong management with vast experience and technical expertise .Futher, the independent directors come from
diversified industries and include dignified professions such as EX- Indian Administrative Officer, EX- Chief Secretary, EX-IAS, Legal
luminaries , etc. Basis are screening of publicly available data we do not found any prominent political connections of leadership and
independent directors with national and regional political parties . Further, we do not found any conflict of interest of independent
directors with the companies as reported.
The current managing director of the company Mr. Ashok Kajaria is widely credited with spearheading a transformation of the tile industry
in India and is best known for being the pioneer behind revolutionizing tile display and marketing. Mr. Kajaria has held several important
industry positions including President of PHD Chamber of Commerce, Chairman of the Indian Council of Ceramic Tile and Sanitaryware and
member of the executive committee of Federation of Indian Chamber of Commerce and Industry.The Current Joint managing Directors of
the company are Mr. Chetan Kajaria and Mr. Rishi Kajaria both have experience of 23 years and 19 years respectively, on the basis of this
information it appears that company is run as family business. Other members of management were hired and promoted as per there
competencies and technical expertise . While Mr Ashok Kajaria has been managing the business for 47 years , other members of
leadership team has been associated with the company for more than 30 years.

Shareholding pattern:
The company has majority of his shareholding with institutions and public to the total of 52.5% . As on December 2023 promoters are
holding 47.5% , FIIs are holding 18.3%, DIIs are holding 25.5%, and Public holding is 8.7% respectively. The promoters have never pledged
there shares in the past history. Promoters shareholding have been constant at ~47.5% from March 2017 to till today. Where as there is
an decrease in the FIIs holding from 23.4% in March 2017 to 18.3% in December 2023 ,and on the other hand DIIs have significantly
increased there shareholding from 5.8% in March 2017 to 25.5% in December 2023 which is a good sign. While public holding have been
decreased significantly from 23.5% in March 2017 to 8.7% in December 2023. Overall, it seems like most of shares are held by the big
investors which is a good sign.
Yearly and Quarterly Shareholding pattern of the company is as under:
Exhibit 4: Yearly shareholding pattern
Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Dec-23
Promoters 47.4% 47.6% 47.6% 47.6% 47.5% 47.5% 47.5% 47.5%
FIIs 23.4% 28.1% 26.0% 23.1% 25.3% 21.3% 16.9% 18.3%
DIIs 5.8% 8.9% 10.3% 14.9% 14.5% 20.3% 26.2% 25.5%
Government 0.0% 0.3% 0.4% 0.4% 0.0% 0.0% 0.0% 0.0%
Public 23.5% 15.1% 15.7% 14.0% 12.8% 10.9% 9.4% 8.7%
Exhibit 5: Quarterly shareholding pattern
Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23
Promoters 47.5% 47.5% 47.5% 47.5% 47.5% 47.5% 47.5% 47.5% 47.5% 47.5% 47.5% 47.5%
FIIs 25.3% 25.1% 24.9% 22.5% 21.3% 19.6% 19.4% 18.6% 16.9% 18.0% 18.5% 18.3%
DIIs 14.5% 14.9% 15.2% 17.3% 20.3% 22.4% 22.8% 24.5% 26.2% 25.2% 25.4% 25.5%
Public 12.8% 12.5% 12.4% 12.8% 10.9% 10.5% 10.3% 9.4% 9.4% 9.3% 8.6% 8.7%
Exhibit 6: Exhibit 7:
Quarterly FIIs holding pattern Quarterly DIIs holding pattern

30.0% 30.0%
25.0% 25.0%
20.0% 20.0%
15.0%
15.0%
10.0%
10.0%
5.0%
5.0%
0.0%
0.0%
Source: Company analysis,BSE.

Commentary:
Management Remuneration:
During FY23 company has incurred managerial remuneration of INR16.81 crores, there has been 0% growth in managerial
remuneration when compared to last year. The details are as under:
Designation FY23 FY22 Ratio of remuneration Growth in Sales growth Net profit growth
with median employee Remuneration YoY% YoY%
salary
Mr. Ashok Kajaria Chairman & MD 5.67 5.67 92x 0.00% 18.27% -9.66%
Mr. Chetan Kajaria JMD 5.57 5.56 91x 0.18% 18.27% -9.66%
Mr. Rishi Kajaria JMD 5.57 5.56 91x 0.18% 18.27% -9.66%
Total 16.81 16.79 0.12%
Median ratio of KMP remuneration with median employee salary is 92x where as the details of median of the same for peers
are as under:
Cera Sanitaryware KMP Designation Ratio of remuneration with Somany KMP Designation Ratio of remuneration with
median employee salary median employee salary
Mr. Vikram Somany CMD 95.25x Me. Shreekant Somany CMD 98.92x
Smt. Deepshikha Khaitan JMD 40.54x Mr. Abhishek Somany CEO & MD 151.46x
Mr.Anupam Gupta E-Tech 39.83x
Orient bell KMP Designation Ratio of remuneration with
Mr. Ayush Bagla Ex-Director 37.70x median employee salary
Mr. Mahendra Daga Chairman 98.92x
Mr. Madhur Daga MD 151.46x
We have observed variation in revenue growth and profit growth of the company and growth in KMP remuneration. The
revenue grew at 10.1% CAGR over the last 5 years and 16% CAGR for the last 3 years whereas the profit has grew at 8.60%
CAGR over the last 5 years and 10.90% over the last 3 years. Whereas the KMP remuneration has declined by 1.2% over the
last 5 years CAGR and has increased by 7.90% CAGR over the last 3 years, this significant variation in the KMP remuneration is
because of pay cuts taken by the KMP during Covid-19 pandemic.
Exhibit 7: Revenue growth vs profit growth vs KMP remuneration growth
Year 2019 2020 2021 2022 2023 5 years 3 years

Revenue 2,956 2,808 2,781 3,705 4,382
Growth % -5.01% -0.96% 33.23% 18.27% 10.10% 16.00%
Year 2019 2020 2021 2022 2023 5 years 3 years

Profit 229 254 309 383 346
Growth % 10.92% 21.65% 23.95% -9.66% 8.60% 10.90%
Year 2019 2020 2021 2022 2023 5 years 3 years

KMP Remuneration 13.25 13.40 8.20 16.79 16.81
Growth % 1.13% -38.81% 104.76% 0.12% -1.20% 7.90%

Board Efficiency:
Basis of our research , Board of Directors (BOD) has adequate representation of independent directors , Industry experts,
finance and legal experts as required by the statue.
The efficiency of BOD can be gauged with their contribution in various important meetings held in FY23. The details are as
under:
Exhibit 8: Board meeting attendance
Name Category of No. of Board Attendance Directorship in Committee Committee

Director meetings at last AGM other Chairmanship of Membership of
Held Attended companies other Boards other Boards
1 Mr. Ashok Kajaria Chairman & MD 6 6 Yes 1 0 2
2 Mr. Chetan Kajaria JMD 6 6 Yes 1 0 1

3 Mr. Rishi Kajaria JMD 6 6 yes 1 0 0
Director (Non-
4 Mr. Dev Datt Rishi Ex) 6 6 Yes 1 0 0
5 Mr. Raj kumar Bhargava Director ( Non-Ex 2 2 Yes 2 2 2

& Independent
6 Mr. Debi Prasad Bagchi Director ( Non-Ex 2 2 Yes 0 0 0
& Independent
7 Mr. H. Rathnakar Hegde Director ( Non-Ex 6 6 Yes 1 1 0
& Independent
8 Mrs. Sushmita Singha Director ( Non-Ex 6 6 Yes 3 0 0
& Independent
9 Dr. Lalit Kumar Panwar Director ( Non-Ex 4 4 1 0 1
& Independent
10 Mr. Sudhir Bhargava Director ( Non-Ex 4 4 2 2 1
& Independent
• Mr. Raj Kumar Bhargava and Mr. Debi Prasad Bagchi ceased to be the Independent Director(s) of the Company from the
conclusion of the 36th AGM of the Company held on 23rd September, 2022 as they had completed their tenure of the
Independent Director(s) of the Company.
▪ Dr. Lalit Kumar Panwar and Mr. Sudhir Bhargava appointed as the Independent Director(s) of the Company for a period of
five consecutive years effective from the conclusion of the 36th AGM of the Company held on 23rd September, 2022.
During FY23, the company has been supervised by the BOD efficiently as the majority of the members of the board have attended all the
board meetings. Which shows good participation by the board in key matters discussed during the year and help the company in taking
effective decisions.

❑ Quarterly Results snapshots:

Exhibit 9:
Particular (INR Crores) FY23Q1 FY23Q2 FY23Q3 FY23Q4 FY24Q1 FY24Q2 FY24Q3 FY24Q4E
Net revenue 1,008 1,078 1,091 1,205 1,064 1,122 1,152 1,526
Total Expenditure 855 948 958 1,029 895 942 973 1295
EBITDA 153 130 133 176 169 180 179 231
EBITDA Margins (%) 15.2% 12.1% 12.2% 14.6% 15.9% 16.0% 15.5% 15.1%
Depreciation 32 34 33 34 31 36 39 34
Interest 4 3 8 7 5 4 5 5
Other income 8 4 7 6 9 8 11 8
PBT Before Tax 125 97 99 141 142 148 146 200
Tax 32.5 28.13 25.74 29.61 34.08 37 37.96 54
Tax rate (%) 26% 29% 26% 21% 24% 25% 26% 27%
Net Profit 93 69 73 111 108 111 108 146
Net Profit Margins 9.2% 6.4% 6.7% 9.2% 10.1% 9.9% 9.4% 9.6%
❑ Annual Results snapshots:

Exhibit 10:
Particular FY19A FY20A FY21A FY22A FY23A FY24E FY25E
Net revenue 2956 2808 2781 3705 4382 4864.0 5525.5

YoY Change (%) -5.0% -1.0% 33.2% 18.3% 11.0% 13.6%
COGS 1008 990 1145 1399 1626 1702 1934
COGS % revenue 34.1% 35.3% 41.2% 37.8% 37.1% 35.0% 35.0%
Gross Profit 1948 1818 1636 2306 2756 3161.6 3591.8
Gross Margins (%) 65.9% 64.7% 58.8% 62.2% 62.9% 65.0% 65.0%
Selling & General Admin Expense 1499 1402 1127 1695 2164 2383 2684
S,G & A % revenue 50.7% 49.9% 40.5% 45.8% 49.4% 49.0% 48.6%
EBITDA 449 416 509 611 592 778.6 907.8
EBITDA Margins (%) 15.2% 14.8% 18.3% 16.5% 13.5% 16.0% 16.4%
Depreciation 89 108 107 115 133 135 137
Interest 16 20 11 13 22 24 25
Other income 8 23 15 26 25 20 20
Profit Before EO Expenses 352 311 406 509 462 639.6 765.8
Extra ordianry Expense 4 0 0 0 7.9 0 0
Profit Before Tax 348 311 406 509 454 639.6 765.8
Tax 119.0 56.9 96.8 125.0 108.1 159.9 191.5
Tax Rate (%) 34% 18% 24% 25% 24% 25% 25%
Net Profit 229.42 254.01 309.09 383.46 346.10 479.7 574.4
Net Profit Margins (%) 7.8% 9.0% 11.1% 10.3% 7.9% 9.9% 10.4%
Source: Company analysis, Consensus estimates.

Commentary:
Revenue & Margin Analysis (FY22-23):
Revenue growth witnessed by the company FY22-23 was 18.27% from 3705cr FY22 to 4382cr FY23. Major growth driving reasons were
both volume growth and price hikes , company witnessed a sales volume of 101msm (Million Square Meter) which is 10.20% increase
from the previous year 91.65msm FY21-22, company was not able to meet the guidance given by the management of volume growth
around 15%-20% FY23, reason behind this was subdue demand in Tier-1 cities.
Second reason for revenue growth is price hikes of 2% made by the company in the month of May & September each, reason behind the
price hikes was 70% increase in the gas prices due to Russia-Ukraine war, which has impacted margins of 1st three quarters of the
company ,so to maintain the EBITDA margin within the range of 14%-16% for the coming quarters company has made the price hike of
4% and also to reduce the impact, company has started using alternative fuel options like Biofuel in some of the plants to bring the
average cost of gas down.
Gas Prices:
Q2- Rs61
Q3- Rs55
Gas price FY21-22 was average around Rs38
Revenue & Margins Analysis (FY23-24):

The company has observed a decrease in demand in the first and Sales vs Sales Growth
second quarters of this year as a result of the northern states high
rains. As a result, of this the company lowered its volume growth 6000 40.0%
target for the year from 13%–15% to 9%–10%. Because fuel prices 35.0%
have dropped to an average of Rs. 38, the company is able to keep 5000 30.0%
its EBITDA margins between 15% and 16%. There won't be any 25.0%
4000
price increases in the current year, according to management; 20.0%
instead, the company is transferring this benefit to dealers by 3000 15.0%
giving them a little price discount, which will eventually help to 10.0%
increase sales. 2000 5.0%
The company is still going through a difficult demand phase and 0.0%
muted tile volume in Q3FY24. The company has grown modestly 1000
-5.0%
year over year—by 6%—to achieve a volume of 27.09 MSM. INR
0 -10.0%
1152 crores was the total revenue for the quarter, with EBITDA
margins remaining at 15.52%. FY20A FY21A FY22A FY23A FY24E FY25E
Slow real estate growth is the cause of the weak demand. Even
though the real estate market has been performing well over the Sales YoY change(%)
past few years, they are still selling locked-in old inventory.
Demand will arise just as they are about to complete their new
projects because the application of paints, tiles, and sanitary
supplies comes last.
EBITDA Margins
Thirty percent of the company's sales come from Tier-1 and Tier-2
cities. Metro is 20% further, Tier 3 is 15%, and Tier 4 is roughly 5%. 200 18.0%
180 16.0%
Despite the current obstacles, the company is optimistic about the
160 14.0%
demand for tiles in the industry in FY25 due to strong real estate
growth and significant government infrastructure spending. The 140
12.0%
company is also focusing on new projects like the modernization of 120
10.0%
airports, and Prime Minister has recently announced the 100
modernization of 500 railway stations throughout India. 8.0%
80
6.0%
60
After calculating the median of all of the above factors, including
40 4.0%
historical growth trends, consensus predictions, and current
market demand, we can infer that the company's projected 20 2.0%
revenue growth for CY23–24 will be between 10% and 12%, less 0 0.0%
than the company's guidance of 14%–16%. preserving a 15%–16% FY23Q1 FY23Q2 FY23Q3 FY23Q4 FY24Q1 FY24Q2 FY24Q3
EBITDA margin.
Q1 Sales volume: 25MSM. EBITDA Margins
Q2 Sales volume: 26.47 MSM.
Q3 Sales volume: 27.09 MSM.
Source: Company analysis, Consensus estimates.

Commentary:
Trade Payables:
COGS growth vs Payables growth
Growth of COGS is not in line with the growth of trade payables. 50.0%
However company has managed to reduced the payable days
from FY20 103 days to FY23 80 days. 40.0%
30.0%
Payable % of liabilities has significantly improved from FY19 13%
20.0%
to FY23 9% and has been consistent from last 4 years.
10.0%
Basis of our research peers in our industry are maintaining median 0.0%
payable days of 124 days which is very higher than the company's FY18 FY19 FY20 FY21 FY22 FY23
-10.0%
payable days of 80.
-20.0%
Out of the total payables recorded FY23 ~96% has to be paid -30.0%
within the span of 3 months.
Growth in COGS Growth in payables
Sales growth vs Receivable growth

40.0%
Trade receivables:
30.0%
Before FY19 company was struggling to maintain consistent
20.0% debtor policy. The growth of revenue was not in line with the
growth of receivables. however, from FY19 company has been
10.0% able to maintain consistency between revenue growth and
0.0%
receivables. Due to which the receivable days has been reduced
FY18 FY19 FY20 FY21 FY22 FY23 from 61 days in FY18 to 50 days in FY23. But, there is not a
-10.0% significant improvement in receivable turnover , it is standing at
~7x.
-20.0%
Sales growth Receivable growth Basis our research, the peers in our industry has median
receivable days of 49 which is slightly lower than company's
receivable days of 50. However we noticed that company's
receivable days are up to the mark when compared to close peers
Sales vs Receivables days (Orient bell , Somany, Asian granito) which has median receivable
days of 58.
5000 70
4500 Out of the total reported receivables of FY23 ~ 98% is due for less
60
4000 than 6 months and receivables with critical credit risk ( Ageing > 6
3500 50 months ) is miniscule as compared to total revenue (0.3%) trade
3000 40 receivables ( 2% ) in FY23.
2500
2000 30 Company has pledged 100% of its trade receivables and
2711
2781
4382
2808
2956
3705
1500 inventory as security.

20
1000
Considering the overall credit risk management of the company
500
10 the receivable is not at significant risk of impairment.
0 0
FY18 FY19 FY20 FY21 FY22 FY23
Sales Receivable days

Commentary:
Inventory:
Before FY22 company was struggling with its inventory levels. The
Inventory
growth of revenue was not in line with the growth of inventory,
reason behind this was covid-19 pandemic and slow down in real 5,000 250
estate and construction sector, due to which company's inventory 4,500
days got shoot up during that period. However, from FY22 4,000 200
company has been able to maintain consistency between revenue 3,500
growth and inventory growth. 3,000 150
2,500
And also, there is a marginal decline witnessed in inventory days 2,000 100
during last 3 years i.e. from 222 days FY20 to 147 days FY23. The 1,500
median inventory days of peers stands at 133 days ( Highest 167 1,000 50
days and lowest being 88 days). Considering size and scale of 500
company's operations , the inventory days seems to be normal. 0 0
As per our research, there is no major challenges seen in Jan-19 analysis.
Jan-20 Jan-21 Jan-22 Jan-23
Source: Company
inventory levels.
Sales Inventory Inventory days
Intangible Assets:
Kajaria ceramics has witnessed 286.7% i.e. 4x growth in its

intangible assets FY23 as compare to last year.
Intangible assets (%) of Fixed assets This is due to substantial increase in goodwill & goodwill has
3500 1.20%
increased because company has acquired a new subsidiary
named South Asian Ceramics Tiles Pvt Ltd , which is engaged in
3000 to the business of manufacturing of tiles. having a capacity of
1.00%
4.79 MSM ( Million Square meter ) ceramic tiles.
2500
0.80%
if we deep dive in to the company's history , we can observe that
2000 company has done many acquisition from time to time for
0.60% increasing its production capacity so that they can easily cater
3328
2986
2525
1500 the increasing demand all over the country.

0.40%
2140
1000
2372
And company's CMD - Mr. Ashok Kajari a has a strong belief that
2437
500 0.20% southern market of our country is more organized as compared

to northern & western markets, and he has strong conviction
0 0.00% that demand will be more in future so to cater this demand it is
FY18 FY19 FY20 FY21 FY22 FY23 good to expand and increase the capacity now & rather doing
greenfield capex it is beneficial to acquire a plant which already
Total Assets Intangible assets % of Total assets exist so they can increase there foothold in the southern market
more quickly.
Consideration paid to acquire South Asian Ceramics was 24.5Cr

And goodwill realised is 27.29Cr.

Exhibit 11:
Depreciation analysis ( Excluding Right of use Assets) 2018 2019 2020 2021 2022 2023
Revenue 2711 2956 2808 2781 3705 4382

Revenue growth YOY 6.3% 9.0% -5.0% -1.0% 33.2% 18.3%
Net fixed assets 1145 1078 1153 1164 1111 1405

Fixed assets growth YoY -2.7% -5.9% 7.0% 0.9% -4.6% 26.5%
Fixed assets % revenue 42.2% 36.5% 41.1% 41.8% 30.0% 32.1%
Depreciation 89 89 91.29 94.16 102.01 118.08

Depreciation growth YoY 9.9% 0.0% 2.6% 3.1% 8.3% 15.8%
Depreciation as % revenue 3.3% 3.0% 3.3% 3.4% 2.8% 2.7%

Depreciation % fixed assets 7.8% 8.3% 7.9% 8.1% 9.2% 8.4%
Average life of asset 19 19 20 20 19 19

Average age of asset 6 7 7 8 8 7
% of assets consumed 32.4% 35.7% 37.2% 39.0% 42.7% 37.4%
Assets turnover ratio 2.4x 2.7x 2.4x 2.4x 3.3x 3.1x
Peers Depreciation % Net block FY19 FY20 FY21 FY22 FY23

Cera sanitaryware 7.5% 9.4% 10.0% 9.3% 9.4%
Somany ceramics 6.2% 7.6% 8.2% 8.5% 6.7%
Orient bell 7.1% 9.0% 10.1% 10.1% 8.4%
Kajaria Ceramics 8.3% 7.9% 8.1% 9.2% 8.4%
Industry median 7.3% 8.5% 9.1% 9.3% 8.4%
Peers Depreciation % Revenue

Cera sanitaryware 1.7% 2.7% 2.7% 2.1% 1.7%
Somany ceramics 2.6% 3.7% 3.8% 3.1% 2.7%
Orient bell 3.0% 4.3% 4.2% 3.2% 3.0%
Kajaria Ceramics 3.0% 3.3% 3.4% 2.8% 2.7%
Industry Median 2.8% 3.5% 3.6% 2.9% 2.7%
Commentary:
If average age of asset is consistent this means that company is not letting it assets to get older & company is doing capex consistently.
If in case if average age is increasing that means company assets are getting older , that means company is not doing capex at one point
growth will start hitting operating efficiency will get hit and sales and margins will also get affected.
Company has maintained healthy Asset T/O ratio which has increased from 2.4x in FY18 to 3.1x in FY23, which generally implies that
company is able to generate Rs.3.1 over Rs. 1 asset.
This particular analysis helps to find out whether company has ever manipulated its useful assets of life.
According to peer analysis company has consistently maintained its depreciation percentage to net block and revenue constantly
meeting the industry median.
Cash flow Ratio analysis:
Exhibit 12:
CFO/EBITDA
Company FY14 FY15 FY16 FY17 FY18 Average FY19 FY20 FY21 FY22 FY23 Average
Kajaria ceramics 58% 51% 68% 68% 52% 59% 70% 54% 99% 70% 50% 68%
Cera sanitaryware 66% 34% 82% 65% 43% 58% 60% 75% 175% 44% 55% 82%
Somany ceramics 90% 23% 42% 50% 59% 53% 52% 115% 186% 69% 87% 102%
Orient Bell 111% 246% 56% 77% 72% 112%
This particular analysis helps to find out, how much efficiently is business able to convert its operating earnings into pure cash flow.
Generally a conversion ratio of 60% is considered favourable for B2B ( Business-to-Business ) operations, while a 70% ratio is considered
good for B2C ( business-to-Consumer ) operations. Kajaria conversion ratio has shown improvement over the 5 year average period,
increasing from 59% in FY14-18 to 68% in FY19-23. This improvement can be attributed to company’s efficiency in managing inventory
and receivables. Considering size and scale of the business operations this ratio seems to be normal.
In contrast, Somany and orient bell has managed to significantly improve their conversion ratio that is above 100% , the reason behind
this is both the companies are strongly focusing to achieve efficiency in working capital management and also both the entities are
conservatively managing their inventories to mitigate the risk of over production/ over supply.
Where as cera sanitaryware has been efficiently able to improve its conversion ratio i.e. from 53% in FY14-18 to 82% in FY19-23. This
improvement can be attributed to changes in its debtors and creditors policy which is also reflected in its working capital cycle
Exhibit 13:
Working capital days
Kajaria ceramics 16 21 34 39 54 33 49 71 61 48 60 58
Somany 22 31 39 80 89 52 91 89 55 37 31 61
Orient bell 67 63 84 71 68 56 39 36 41 48
Cera Sanitaryware 52 63 55 53 64 57 63 73 30 43 49 52
Exhibit 14:
FCFF/Sales
Kajaria ceramics 0.2% -4.3% 1.4% 7.3% 2.6% 1.4% 6.2% 3.5% 13.8% 4.1% 0.9% 5.7%
Cera sanitaryware 3.5% -5.2% 9.9% 5.8% 2.0% 3.2% 5.4% 6.8% 21.1% 6.0% 6.8% 9.2%
Somany ceramics 1.2% -1.7% -4.5% 0.8% -1.1% -1.1% -4.0% 5.4% 19.1% -6.0% -0.4% 2.8%
Comparatively, among the peer group, Cera sanitaryware maintains the highest average FCFF/sales ratio i.e. standing at 9.2% over the
period of FY19-23. This can be attributed to cera’s management strong belief in to low capex/ brownfield expansion model and also
very strong credit control policies. The reason behind their successful low capex expansion model is their major source of revenue is
faucet and sanitaryware which requires comparatively low capex as compare to its peers.
On the other hand, somany has the lowest ratio in the group that is because of strong capex cycle. And Kajaria ceramics FCFF/Sales ratio
has shown improvement , increasing from average 2.6% in FY14-18 to 5.7% in FY19-23, mainly due to enhanced working capital
management with debtors day decreasing from 61 days in FY18 to 50 in FY23, considering size and scale of business operations this
ratio seems to be good.

Exhibit 15: Dupont
Dupont analysis:
Revenue from Operations (in Crs.) Net Profit (in Crs.) Earnings Per Share (in Rs.)
377
4,382 345
308
3,705 24.0
255 21.7
2,808 2,781 19.4
15.9
Mar-20 Mar-21 Mar-22 Mar-23 Jan-20 Jan-21 Jan-22 Jan-23 Mar-20 Mar-21 Mar-22 Mar-23
Asset Turnover Ratio Return on Equity Return on Capital Employed

1.34 1.39
21.2 22.9
1.17 19.18 17.7 18.8
1.12 17.24 % %
15.42 % 15.56 % %
%
% %
Mar-20 Mar-21 Mar-22 Mar-23 Mar-20 Mar-21 Mar-22 Mar-23 Jan-20 Jan-21 Jan-22 Jan-23
RETURN ON EQUITY (ROE)

Mar-20 Mar-21 Mar-22 Mar-23
NET PROFIT ₹ 253.53 ₹ 308.90 ₹ 382.74 ₹ 346.20
AVERAGE SHAREHOLDERS EQUITY ₹ 1,644.59 ₹ 1,791.57 ₹ 1,995.62 ₹ 2,224.58
RETURN ON EQUITY 15.42% 17.24% 19.18% 15.56%
ROE - DUPONT EQUATION

NET PROFIT ₹ 253.53 ₹ 308.90 ₹ 382.74 ₹ 346.20
REVENUE ₹ 2,808.01 ₹ 2,780.90 ₹ 3,705.19 ₹ 4,381.93
NET PROFIT MARGIN (A) 9.03% 11.11% 10.33% 7.90%
REVENUE ₹ 2,808.01 ₹ 2,780.90 ₹ 3,705.19 ₹ 4,381.93

AVERAGE TOTAL ASSETS ₹ 2,404.50 ₹ 2,481.23 ₹ 2,755.56 ₹ 3,156.82
ASSET TURNOVER RATIO (B) 1.17 1.12 1.34 1.39

AVERAGE SHAREHOLDERS EQUITY ₹ 1,644.59 ₹ 1,791.57 ₹ 1,995.62 ₹ 2,224.58
EQUITY MULTIPLIER (C) 1.46 1.38 1.38 1.42
RETURN ON EQUITY (A*B*C) 15.42% 17.24% 19.18% 15.56%

RETURN ON ASSETS (ROA)

NET PROFIT ₹ 253.53 ₹ 308.90 ₹ 382.74 ₹ 346.20

RETURN ON ASSETS (ROA) 10.54% 12.45% 13.89% 10.97%
ROA - DUPONT EQUATION

NET PROFIT ₹ 253.53 ₹ 308.90 ₹ 382.74 ₹ 346.20
REVENUE ₹ 2,808.01 ₹ 2,780.90 ₹ 3,705.19 ₹ 4,381.93
REVENUE ₹ 2,808.01 ₹ 2,780.90 ₹ 3,705.19 ₹ 4,381.93

RETURN ON ASSETS (A*B*C) 10.54% 12.45% 13.89% 10.97%
RETURN ON CAPITAL EMPLOYED (ROCE)

NOPAT ₹ 250.58 ₹ 305.58 ₹ 372.58 ₹ 344.52

AVERAGE CAPITAL EMPLOYED ₹ 1,670.10 ₹ 1,713.73 ₹ 1,928.89 ₹ 2,234.08
RETURN ON CAPITAL EMPLOYED 15.00% 17.83% 19.32% 15.42%
ROCE - DUPONT EQUATION

NOPAT ₹ 250.58 ₹ 305.58 ₹ 372.58 ₹ 344.52

REVENUE ₹ 2,808.01 ₹ 2,780.90 ₹ 3,705.19 ₹ 4,381.93
NOPAT MARGIN (A) 8.92% 10.99% 10.06% 7.86%
REVENUE ₹ 2,808.01 ₹ 2,780.90 ₹ 3,705.19 ₹ 4,381.93

AVERAGE CAPITAL EMPLOYED ₹ 1,670.10 ₹ 1,713.73 ₹ 1,928.89 ₹ 2,234.08
CAPITAL TURNOVER RATIO (B) 1.68 1.62 1.92 1.96
RETURN ON CAPITAL EMPLOYED (A*B*C) 15.00% 17.83% 19.32% 15.42%

Dupont Summary:
Kajaria ceramics ROE for MAR-21 has increased up to 17.24% FY21 from 15.42%FY20. This noticeable change had taken place
because of drastic fall in manufacturing cost i.e. from 28% FY20 to 22% FY21 , because the low gas price during this period. which
eventually reflected the ~2% positive change in net margins from 9.03%FY20 to 11.11%FY21.
Kajaria ceramics ROE for MAR-22 has increased substantially that is ~4% increase up to 19.18% FY22 from 15.42% FY20. This
significant shift has occurred because lifting up of the lock down and country was again opened up which gave a major boost to
the country's economy, Additionally there was upsurge in infrastructure & real estate sector due to which Kajaria ceramics
witnessed a notable increase in the revenue that is almost 33% rise in the revenue i.e. from Rs2780cr FY21 to Rs3705cr FY22.
Additionally, the asset turnover ratio improved from 1.17x FY20 to 1.34x FY22 due to a considerable rise in revenue of about 33%
compared to an average increase in assets of just ~14%.
Kajaria ceramics ROE for MAR-23 has dropped by ~3.6% i.e. from 19.18% FY22 to 15.56%FY23 the primary reason behind this is
the net margins of the company. Net margins of the company got suffered due to increase in manufacturing cost and reason for
the increased manufacturing cost was the increase in gas prices almost by 68% as a result of Russia-Ukraine war.
However, Kajaria ceramics was able to sustain the ROE above or up to 15% this was because of increased asset efficiency and
continuous capex investments along with price hike of 4% done by the company for maintenance of the margins, which didn't
affect the sales volume of the company ( Sales volume FY22 - 91.65 Msm. - Sales volume FY23- 101Msm.)
Exhibit 16:
Peer comparison ( Dupont Equation ):
PEER COMPARISON (DUPONT EQUATION)

KAJARIA
CERAMICS CERA SOMANY ORIENT BELL
LTD

EQUITY MULTIPLIER (C) 1.42 1.42 2.55 1.56
RETURN ON EQUITY (A*B*C) 15.56% 17.93% 8.54% 7.11%
PEER COMPARISON
KAJARIA
AVERAGE MEDIAN
CERAMICS LTD
NET PROFIT MARGIN (A) 7.90% 6.35% 5.51%
ASSET TURNOVER RATIO (B) 1.39 1.29 1.31
EQUITY MULTIPLIER (C) 1.42 1.74 1.49
RETURN ON EQUITY (A*B*C) 15.56% 14.26% 10.79%
Dupont summary:
It seems that Kajaria Ceramics and CERA Sanitaryware were both able to outperform the industry median and average margins of
5.51% & 6.35% respectively.
And because of a reduction in labour and material costs, and its high margins products CERA was able to post the highest margins,
with a return on equity of 17.93%.

Exhibit 17: Forensic
Forensic Analysis:
Parameters Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Sales Growth - 19.1% 10.4% 5.6% 6.3% 9.1% -5.0% -1.0% 33.2% 18.3%
Debtor Growth 25.6% 32.4% 23.6% 33.0% 5.4% -16.5% 8.8% 18.9% 17.1%
Inventory Growth 57.1% 26.7% -3.2% 1.7% 7.2% 26.3% -27.2% 24.9% 21.2%
Debtors/Sales 9.0% 9.5% 11.4% 13.3% 16.6% 16.1% 14.1% 15.5% 13.9% 13.7%
Inventory/Sales 10.5% 13.9% 15.9% 14.6% 14.0% 13.7% 18.3% 13.4% 12.6% 12.9%
Depreciation % Sales 2.6% 2.6% 3.0% 3.2% 3.3% 3.0% 3.8% 3.8% 3.1% 3.0%
CFO Growth 8.5% 75.1% 7.0% -29.5% 33.2% -29.3% 126.7% -16.4% -30.6% -100.0%
CFO/PAT 126.5% 97.5% 133.7% 133.0% 104.2% 138.7% 88.5% 164.7% 111.2% 85.4%
CFO/EBITDA 57.9% 50.7% 68.2% 67.5% 52.1% 69.8% 53.8% 98.8% 69.5% 49.8%
CFO/Sales 9.0% 8.2% 13.1% 13.2% 8.8% 10.7% 8.0% 18.3% 11.5% 6.7%
Contingent Liability 18.16 16.35 256.61 181.78 36.88 10.45 9.43 9.38 9.81
Contingent Liability % Net Asset - 2.5% 1.7% 21.8% 13.5% 2.3% 0.6% 0.5% 0.4% 0.4%
Intangible Assets 5.47 10.54 11.48 11.48 8.45 8.45 8.45 8.45 32.68
Intangible Assets % Total Assets - 0.7% 1.1% 1.0% 0.8% 0.5% 0.5% 0.5% 0.4% 1.4%
Miscelleneous Expenses 32.2 37.6 30.9 39.1 37.8 40.4 38.4 40.5 0
Miscelleneous Expenses % Total
Sales - 1.5% 1.6% 1.2% 1.4% 1.3% 1.4% 1.4% 1.1% -
Related Party Sale 0 0 0 0.31 0.55 0.57 0.07 0.02 3.23

Related Party Sale % Total Sale - - - - 0.0% 0.0% 0.0% 0.0% 0.0% 0.1%
Debtor Write off

Write off % Debtors - - - - - - - - - -
CWIP to Net Fixed Assets 5.9% 9.0% 0.7% 0.7% 1.5% 8.7% 2.2% 1.2% 22.9% 5.6%
Commentary:
The company's sales growth is on an upward trend and debtors have also gone up slightly which is alright, while considering
size and scale of business operations.
Median & Average Depreciation % Sales ratio have remained stable which indicates that there has been no change in useful
life of asset.
Contingent liability shows a declining trend & also miscellaneous expenses & intangible assets is stable over the years ,
which shows a efficient cost control, which will contribute to overall profitability in future .
Another positive sign is that company has 0.0% of related party sales .

Exhibit 19: Moat Assessment
Moat assessment and comparison with industry peers:

MOAT ASSESSMENT- Kajaria ceramics
Gross Profit Margin 61.73% 63.62% 60.22% 60.81%
EBITDA Margin 14.85% 18.52% 16.52% 13.53%
Net Profit Margin 9.03% 11.11% 10.33% 7.90%
ROIC 15.32% 19.90% 20.55% 15.86%
ROCE 15.00% 17.83% 19.32% 15.42%
ROE 15.42% 17.24% 19.18% 15.56%
EPS ₹ 15.95 ₹ 19.42 ₹ 24.04 ₹ 21.75
ROA 10.54% 12.45% 13.89% 10.97%
MOAT ASSESSMENT- Orient bell

EBITDA Margin 5.32% 6.76% 8.64% 6.70%
ROIC 2.39% 3.22% 12.41% 7.13%
ROCE 4.37% 3.39% 12.19% 6.49%
ROE 1.62% 1.79% 7.22% 4.79%
EPS ₹ 4.98 ₹ 5.33 ₹ 22.35 ₹ 15.51
ROA 1.62% 1.79% 7.22% 4.79%
MOAT ASSESSMENT- Cera sanitaryware

EBITDA Margin 13.54% 12.48% 15.36% 15.91%
ROIC 14.41% 11.35% 14.66% 17.63%
ROCE 17.14% 14.86% 20.74% 24.31%
ROE 10.47% 8.41% 11.02% 13.60%
EPS ₹ 89.19 ₹ 77.93 ₹ 114.88 ₹ 161.28
ROA 10.47% 8.41% 11.02% 13.60%
MOAT ASSESSMENT- Somany ceramics

EBITDA Margin 8.27% 11.58% 9.88% 7.61%
ROIC 1.75% 6.36% 8.57% 5.74%
ROCE 13.33% 9.49% 9.92% 7.33%
ROE 1.21% 3.90% 5.59% 3.53%
EPS ₹ 4.60 ₹ 14.29 ₹ 21.98 ₹ 15.75
ROA 1.21% 3.90% 5.59% 3.53%
Commentary:
The company's gross profit margin is higher than its peers, ranging from 61.7% to 60.8%. In contrast, Cera sanitaryware consistently
generates a gross profit margin with a GP% range of 49%-50%, which is the lowest among its peers. The company's EBITDA
decreased from 16.52% in FY22 to 13.53% in FY23, which is second highest among the peers. The net profit margin suffered from
FY19 to FY23 i.e. 9.03% to 7.90% . Although the Return on Invested Capital (ROIC) has been second highest among the peers i.e.
15.86%. Cera sanitaryware has consistently maintained highest ROIC among the peers i.e. 17.63%. The ROE and ROCE have been
quite consistent for the last 4 years within the range of 15%-16%. Additionally, ROA has remained consistent, whereas EPS is in the
upward trajectory. Moreover, Cera sanitaryware has consistently shown an upward trajectory due to its well-efficient business and
well-known branding moat, which sets it apart from its peers. In contrast, Kajaria ceramics has a brand moat & has a strong retail
presence with around 1800+ dealer network.

Peers GP margins Peers Net margins
62.73%
60.66%
60.08%
56.52%
65%
63%
62%
61%
12%
14%
59%
59%
11%
70%
54%
10%
10%
53%
52%
52%
52%
12% 10%
60%
46%
9%
8%
50% 10%
8%
8%
4.44%
40%
3.69%
5%
2.70%
30% 6%
3%
1.24%
20% 4%
2%
1%
10% 2%
0% 0%
FY20 FY21 FY22 FY23 FY20 FY21 FY22 FY23
Kajaria ceramics Cera sanitaryware Kajaria ceramics Cera sanitaryware
Orient bell Somany ceramics Orient bell Somany ceramics

Peers ROE Peers ROIC
18%
18%
21%
25%
20%
17%
20%
12.81%
18%
15%
15%
15%
15%
16%
20%
15%
15%
14%
12%
15%
11%
9.53%
12%
11%
8.52%
15%
8.57%
6.36%
5.74%
10%
7%
7%
10%
3.30%
1.75%
3%
3%
3%
2%
5% 5%
0% 0%
FY20 FY21 FY22 FY23 FY20 FY21 FY22 FY23
Kajaria ceramics Cera sanitaryware Kajaria ceramics Cera sanitaryware

Orient bell Somany ceramics Orient bell Somany ceramics

Exhibit 24: Ratios
Ratio Analysis:
Profitability Ratios:
Revenue Growth
Peers Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Cera Sanitaryware 13.66% -10.01% -0.62% 19.98% 24.58%

Somany ceramics 0.12% -6.12% 2.52% 26.90% 18.36%
Kajaria ceramics 9.04% -5.01% -0.96% 33.23% 18.27%
Orient bell -12.76% -13.81% 2.07% 30.22% 7.76%
Average 2.51% -8.74% 0.75% 27.58% 17.24%

Median 4.58% -8.07% 0.73% 28.56% 18.32%
Revenue growth is third highest compared to its peers in our company in FY23, company gave a 18.27% sales growth. Company is
constantly meeting and beating the industry average and median sales growth.
Net Margins
Cera Sanitaryware 8.56% 9.59% 8.40% 10.33% 11.69%

Somany ceramics 3.09% 1.24% 3.69% 4.44% 2.70%
Kajaria ceramics 7.75% 9.05% 11.11% 10.34% 7.90%
Orient bell 1.58% 1.42% 1.59% 4.89% 3.12%
Average 5.25% 5.33% 6.20% 7.50% 6.35%

Median 5.42% 5.24% 6.05% 7.61% 5.51%
Net margin growth was 7.9% in FY23, which is second highest among the peers, Company was unable to sustain the net margins
because upsurge in price of gas, but was still able to beat the industry average and median.
EBITDA Margins
Cera Sanitaryware 14.00% 14.00% 12.00% 15.00% 16.00%

Somany ceramics 10% 8% 12% 10% 8%
Kajaria ceramics 15% 15% 18% 16% 14%
Orient bell 6% 5% 7% 9% 7%
Average 11.30% 10.45% 12.32% 12.62% 11.13%

Median 12.00% 11.00% 12.00% 12.50% 10.76%
EBITDA margin was 14% in FY23, which is second highest among the peers. Company was able to sustain the EBITDA margin last year
was because of price hikes made by the company which did not had any impact on sales volume of the company, which is a good sign.
Company is consistently beating the industry average and median from the last 5 years, which shows company’s resilience on margins
front.

Efficiency Ratios
Debtor days
Cera Sanitaryware 81 67 63 42 38
Somany ceramics 89 63 49 41 40
Kajaria ceramics 59 52 57 51 50
Orient bell 74 64 67 58 58
Average 76 61 59 48 47
Median 78 64 60 46 45
Company has able to decrease its debtor days from 59 days in FY19 to 50 days in FY23. Company has the second highest debtors
days when compared to its peers which is alright considering the size and scale of business operations.
Inventory Days

Orient bell 122 125 94 97 119
Average 135 169 115 129 145

Median 132 164 111 132 147
Company has able to decrease its Inventory days from 174 days in FY19 to 147 days in FY23. Company has the second highest
inventory days when compared to its peers which is alright considering the size and scale of business operations.
Net Fixed Asset Turnover Ratio

Cera Sanitaryware 4.4 3.5 3.6 4.5 5.6

Somany ceramics 2.4 2.1 2.2 2.8 2.4
Kajaria ceramics 2.7 2.4 2.4 3.3 3.1
Orient bell 2.4 2.1 2.4 3.2 2.8
Average 3.0 2.5 2.7 3.4 3.5

Median 2.6 2.3 2.4 3.2 3.0
Company has able to improve its Net fixed asset T/O ratio from 2.7x in FY19 to 3.1x in FY23. Which shows that company is efficiently
using its assets and is not letting them to get older by constantly doing capex.

Leverage Ratios
Debt/Equity

Somany ceramics 0.94 0.87 0.72 0.71 0.68
Orient bell 0.4 0.3 0.2 0.1 0.0
Average 0.37 0.32 0.25 0.22 0.22

Median 0.26 0.18 0.12 0.07 0.08
The current D/E ratio of the company stands at 0.11x and has remained below 1x over the last 5 years. This is lower than the
industry average of 0.22x and slightly higher than the industry median of 0.08x. Although, the current ratio is within the
comfortable range, any further increase in the D/E ratio would be a cause of concern.
Debt/EBITDA

Somany ceramics 3.48 3.98 2.41 2.47 2.83
Orient bell 2.73 2.35 1.18 0.28 0.19
Average 1.64 1.73 1.01 0.80 0.90

Median 1.50 1.38 0.71 0.28 0.31
The current D/EBITDA ratio of the company stands at 0.42x and has remained below 1x over the last 5 years. This is lower than
the industry average of 0.90x and slightly higher than the industry median of 0.31x. Although, the current ratio is within the
comfortable range, any further increase in the D/EBITDA ratio would be a cause of concern.
Financial Leverage

Somany ceramics 2.71 2.56 2.43 2.46 2.55
Orient bell 1.98 1.76 1.76 1.60 1.56
Average 1.94 1.80 1.75 1.72 1.74

Median 1.77 1.61 1.62 1.51 1.50
The current Financial leverage ratio of the company stands at 1.43x and has remained below 2x over the last 5 years. This is lower
than the industry average of 1.74x and slightly lower than the industry median of 1.50x. Although, the current ratio is within the
comfortable range, any further increase in the financial leverage ratio would be a cause of concern. This shows that company’s
lower dependency on debt front.

Interest coverage ratio

Orient bell 2 1 3 10 16
Average 21 15 13 17 25
Median 9 11 7 11 19
Exhibit 25:
Calculation of weighted average interest rate IN CRS
Type of loan Loan amt Interest rate
Term loan from bank (Secured) 2.75 9.10%

Loan from others 9.13 8.00%
Working capital facility 25 9.00%
Working capital facility 15 8.40%
Working capital facility 94.06 8.76%
Sum of products 17.79703

Sum of weights 203.37
Weighted average interest rate 8.75%
Commentary:
Company is currently having a zero net debt position, which means company currently holds cash balance of 394cr against total
borrowings of 250cr.
Entity currently have the ICR of 22 which implies that company's current earnings are enough to pay the interest for next 22 years.
Through this we can infer that company is in to healthy financial condition beating the industry median ICR of 19.
Entity's Weighted average cost of interest FY24 stands at 8.75%

Valuation Ratios
Enterprise Value(EV)
Somany ceramics 2036 540 1872 2889 1946
Orient bell 239 83 316 731 717
Average 3941 2357 5386 6459 6961

Median 3024 1821 3442 4563 5135
Price/Earning (P/E Ratio)

Orient bell 27 12 39 23 33
Average 35 22 41 34 38
Median 37 25 43 36 36
EV/EBITDA
Average 15 10 20 20 21
Median 17 9 19 20 22
Price/Book Value
Average 4 2 4 5 5
Median 5 2 4 5 5

Exhibit 26:
ROIIC Profiling - KAJARIA CERAMICS LTD
Rs Cr Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23
Net Income 131.4 184.9 236.1 253.8 228.6 228.8 253.5 308.9 382.7 346.2
Capital Employed 734.9 973.2 1,244.0 1,336.3 1,438.9 1,442.9 1,655.1 1,552.1 1,862.9 2,182.8
ROIIC Profiling
Cumulative Net Income 2,554.9

Incremental Capital
Deployed 1,447.96
Reinvestment Rate 56.67%
ROIIC 14.84%
Intrinsic Compounding
Rate 8.41%
Stock Price (10 Year CAGR) 20.32%

Stock Price (5 Year CAGR) 13.02%
Net Income vs Capital Employed

3,000
2,182.8
2,500 1,862.9
1,655.1 1,552.1
2,000 1,438.9 1,442.9
1,244.0 1,336.3
1,500 973.2
734.9
1,000
308.9 382.7 346.2
500 184.9 236.1 253.8 228.6 228.8 253.5
131.4
0
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
Net Income Capital Employed
Commentary:
Kajaria ceramics listed in 2012, recorded it's net income 131Cr in FY14 & grew exponentially to reach 346.2Cr by FY23.Similarly the
capital employed in FY14 stood at 734.9Cr which grew to 2182.8Cr by Greenfield and brownfield capex over the years. The
accumulated income over the years stands at 2554.9Cr, Meanwhile the incremental capital deployed in the business is 1447.9Cr.
These figures help in calculating the reinvestment rate in Kajaria ceramics which stands at 56.67%, which implies the total income
generated over the total capital deployed is 57%.
Return on the incremental capital employed is 14.84% & the intrinsic compounding rate at 8.41% which implies the growth of the
company without deploying any additional capital is able to generate these returns. Meanwhile the stock has provided a return of
CAGR 13.02%.The Stock price is definitely overvalued since the business is growing at 8.41%% versus the stock providing a 5 year
CAGR 13.02%. My observation is that the business is really good, but in order to take any investment ideas, need to check various
other aspects.

Relative pricing valuation:
Exhibit 27:
Name CMP Rs. Mar Cap Rs.Cr. Sales Rs.Cr. Cash End Rs.Cr. Debt EBIT EV Rs.Cr. EV / EBITDA EV / EBIT EV/Sales Rs.Cr.
Rs.Cr.
Kajaria
Ceramics 1289.25 20532.41 4542.42 393.78 168.42 563 20184.03 27.19x 33.50x 4.4x
Cera Sanitary. 7569.5 9844.8 1855.25 25.32 42.63 254 9866.05 28.60x 31.62x 5.3x
Somany
Ceramics 682.95 2900.79 2533.05 154.54 370.56 163 3154.32 12.76x 17.98x 1.2x
Orient Bell 360 522.45 666.46 3.3 24.79 5 538.94 20.51x 106.30x 0.8x
Exxaro Tiles 112.3 502.45 315.71 2.91 117.25 17 617.06 21.80x 36.45x 2.0x
Broad set - Low 502.45 315.71 2.91 24.79 5.00 538.94 12.76x 17.98x 0.8x
Broad set -
25th percentile 522.45 666.46 3.30 42.63 17.00 617.06 20.51x 31.62x 1.2x
Broad set -
Average 6860.58 1982.58 115.97 144.73 200.40 6872.08 22.17x 45.17x 2.8x
Broad set -
Median 2900.79 1855.25 25.32 117.25 163.00 3154.32 21.80x 33.50x 2.0x
Broad set -
75th percentile 9844.80 2533.05 154.54 168.42 254.00 9866.05 27.19x 36.45x 4.4x
Broad set -
High 20532.41 4542.42 393.78 370.56 563.00 20184.03 28.60x 106.30x 5.3x
EV/EBIT EV/Sales
Median 33.50x 2.0x
Target EBIT 563 563

Target sales 4542 4542
Target relative pricing 18860.5 8877.408128
Shares outstanding 15.92 15.92
Implied value per share 1185 558

Valuation - Discounted Cash Flow

KAJARIA CERAMICS LTD
Key Assumptions FCF CAGR Trend

Years 1-5 6-10 9-Years 7-Years 5-Years 3-Years
FCF Growth Rate 13% 7% -206% 97% 54% 54%
Discount Rate 10% 15%
Period (t) Mar-22 Mar-23 Mar-24 Mar-25 Mar-26 Mar-27 Mar-28 Mar-29 Mar-30 Mar-31 Mar-32
Year 0 1 2 3 4 5 6 7 8 9 10
Free Cash Flow to Firm 171.5 193.8 219.0 247.5 279.6 316.0 336.5 358.4 381.7 406.5 433.0
Discount rate (r) 10% 10% 10% 10% 10% 15% 15% 15% 15% 15%
PV of Cash Flows 176.0 180.6 147.9 190.1 195.1 147.9 137.4 127.6 118.5 110.0
Stage 1: Sum of Present Values 1531.2
Reverse
Terminal Value DCF
Terminal Growth Rate 7% DCF Value 6522.1
10th Year FCF x (1+g) 461.1 Current Market Cap 21474.7
DCF as % of Mkt
Terminal value 12716.5 Cap 30%
Stage 2: PV of TV 4847.0
Enterprise Value (Stage 1 + 2) 6378.1
Net Debt (Latest Year)

Less:Debt -249.8
Add: Cash 393.8
DCF Value (Equity Value) 6522.1
Short
WACC Long term term
10 year govt bond 7.09% 7.09%
India's credit rating Baa3 Baa3
Rating based default spread 2.39% 2.39%
Risk free rate 4.70% 4.70%
US Implied ERP 4.45% 4.45%

ERP-India 6.84% 6.84%
Beta 1.46 0.794

Cost of equity (Kajaria
Ceramics) 14.68% 10.13%
No. of O/s shares 15.92

CMP 1265
Implied value of share 409.7
Over Valued 3.09x

EBITDA vs EBITDA growth Revenue vs revenue growth
700 25.0% 5,000 40.0%
35.0%
600 20.0%
4,000 30.0%
500 15.0% 25.0%
400 10.0% 3,000 20.0%
15.0%
300 5.0% 2,000 10.0%
200 0.0% 5.0%
1,000 0.0%
100 -5.0%
-5.0%
0 -10.0% 0 -10.0%
EBITDA EBITDA Growth Revenue Revenue growth
Source: Company analysis. Source: Company analysis.

PAT vs PAT growth
EPS vs EPS growth
450 30.0%
400 25.0% 25 25.0%
350 20.0% 20.0%
300 15.0% 20
15.0%
250 10.0% 15 10.0%
200 5.0% 5.0%
150 0.0% 10 0.0%
100 -5.0% -5.0%
50 -10.0% 5
-10.0%
0 -15.0% 0 -15.0%
PAT PAT growth EPS EPS growth

ROE vs ROCE GP vs GP growth
25.00% 3,000 50.0%
2,500 40.0%
20.00%
30.0%
2,000
15.00% 20.0%
1,500
10.00% 10.0%
1,000
0.0%
5.00% 500 -10.0%
0.00% 0 -20.0%
ROE ROCE GP GP growth

Exhibit 34:
Peer stock Performance (1Y)-Indexed:
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24
Kajaria Cera Soamny Orient bell
Peer Financial Performance:
Name CMP Mkt Cap P/E EBITDA ROE ROCE CFO/EBITDA Int Coverage
Kajaria ceramics 1198.9 19092 44 14% 15.50% 15.42% 50% 22
Cera sanitaryware 6813.8 8861 38 16% 18% 26% 55% 58
Orient bell 315.3 459 194 7% 7% 10% 72% 16
Somany ceramics 611.3 2506 27 8% 8.50% 9% 87% 3
Source: Screener.
Analyst Coverage Universe:
# DATE Research House TARGET PRICE AT RECO Rating

1 02-02-24 ICICI Direct 1580 1344.8 Buy
2 01-02-24 HDFC Securities 1410 1377.6 Accumulate
3 01-02-24 BOB Capital Markets Ltd. 1400 1377.6 Hold
4 01-02-24 IDBI Capital 1600 1377.6 Buy
5 23-10-23 HDFC Securities 1470 1222 Buy
6 22-10-23 Motilal Oswal 1580 1230.15 Buy
7 22-10-23 Prabhudas Lilladhar 1368 1230.15 Accumulate
8 21-10-23 ICICI Securities Limited 1454 1230.15 Buy
9 20-10-23 IDBI Capital 1522 1207.05 Buy
10 20-10-23 Sharekhan 1600 1222 Buy
11 26-09-23 Motilal Oswal 1580 1346.45 Buy
12 16-08-23 Geojit BNP Paribas 1610 1445.3 Accumulate
13 02-08-23 IDBI Capital 1580 1428.1 Buy
14 27-07-23 HDFC Securities 1310 1355.65 Accumulate
15 27-07-23 IDBI Capital 1508 1355.65 Hold
16 27-07-23 ICICI Securities Limited 1487 1393.25 Accumulate
17 26-07-23 Prabhudas Lilladhar 1363 1393.25 Hold
18 13-07-23 ICICI Direct 1680 1295.2 Buy
19 29-06-23 Hem Securities 1500 1257.6 Buy
20 14-06-23 IDBI Capital 1580 1289.6 Buy
Source: Trendlyn.
Disclaimer: This is an academic project and does not meant for commercial usage.
This information/document does not constitute an offer to sell or a solicitation for the purchase or sale of any financial instrument or
as an official confirmation of any transaction.
The information contained herein is obtained from publicly available data or other sources believed to be reliable and the Author Has
not independently verified the accuracy and completeness of the said data and hence it should not Be relied upon as such.
The author is not SEBI registered investment analyst. This document is prepared as part of the academic Project.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
The securities quoted are for illustration only and are not recommendatory Registration granted by SEBI, and certification from NISM
in no way guarantees the performance of the intermediary or provides any assurance of returns to investors.

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Academic Research Project:- Not a Recommendation

Kajaria Ceramics Ltd

Global GDP Projections (%)

India vs Global GDP Growth (%) Indian Economy:

FY24 supported by strong domestic drivers and robust capex

8.00% turned it into a favored destination for foreign direct investment

6.00% (FDI).This is evidenced by the highest-ever gross FDI inflows of USD

Source: IMF WEO, RBI, Company Analysis

Kajaria Ceramics Ltd

Source: Company Analysis Source: Knight Frank report vision 2047

Source: GOI,Company analysis. Source: Crisil rating report, Company Analysis

Kajaria Ceramics Ltd

Global Tiles Industry:

Source: Company analysis. Source: Ceramic worldweb, Company Analysis

Kajaria Ceramics Ltd

Indian Tiles industry:

➢ Make in India and other Government Schemes :

➢ Home Extension and Home Improvement Needs :

➢ Evolution of Large Format Tiles and Slabs :

➢ Emergence of new trends :

➢ Low per Capita Consumption:

Kajaria Ceramics Ltd

➢ Market Dependency risks:

➢ Increase in gas prices:

➢ Competition from unorganized players:

➢ Labour disruption risk:

➢ Maintaining relationship with outsourcing partners:

Market share: Natural gas Price (In USD)

Own Capacity(MSM) JV Capacities (MSM)

Kajaria Ceramics Ltd

❑ Synopsis on Kajaria’s Bathware & Plywood segment:

New initiatives and launches in the Bathware and Plywood segments

Launched an exclusive Aurum collection, to be displayed

Added two new ranges to its exclusive Aurum collection

Kajaria’s revenue breakup segment wise

Tiles Sanitarware Plywood Adhesives

Source: Company analysis.

Kajaria Ceramics Ltd

❑ Strong pan India distribution network:

No. of dealers (unit)

❑ Focus on retail sales:

Source: Company analysis.

Kajaria Ceramics Ltd

Quarterly result Analysis – Q3FY24 and Q2FY24:

❑ Financial Performance: ❑ Costs and Pricing:

Kajaria Ceramics Ltd

Below are the details and experience of management:

Source: Company analysis.

Kajaria Ceramics Ltd

Mr. Raj Kumar Bhargava is a retired IAS officer. He is an Independent

Mr. Debi Prasad Bagchi, retired as Chief Secretary to the Government of

Mr. H. Rathnakar Hegde is an Independent Director and joined the Board

Mrs. Sushmita Singha, has over 30 years of experience in the industry,

Source: Company analysis.

Kajaria Ceramics Ltd

He is a retired IAS officer and he has wide experience in the academics,

Source: Company analysis.

Kajaria Ceramics Ltd

RETURN ON EQUITY (ABC) 15.42% 17.24% 19.18% 15.56%