Fundamental Analysis of Kajaria Ceramics: Tiles improve the appearance of the floor. The construction of new residential houses and commercial properties drives the growth of the tile industry, and the tile industry is a major contributor to interior design. In this article, we will fundamentally analyze Kajaria Ceramics’ deals in the tile industry.
Fundamental Analysis of Kajaria Ceramics
Company Overview
Ashok Kajaria founded the company, which was incorporated in 1985. Kajaria Ceramics is India’s largest ceramic/vitrified tile manufacturer and the world’s eighth largest.
It currently has an annual capacity of 86.47 million square meters spread across seven plants, which are located in Sikandrabad, Uttar Pradesh started in 1988; Gailpur, Madhya Pradesh, Malootana in Rajasthan, two in Morbi in Gujarat, Srikalahasti in Andhra Pradesh, and Balanagar in Telangana.
In the last 35 years, Kajaria Ceramics has increased its capacity from 1 million square meters to 86.47 million square meters, and it now offers over 3000 options in ceramic wall and floor tiles, vitrified tiles, designer tiles, and much more.
Segment Analysis
In FY23, the company earned 91.03% of its revenue from Tiles (manufacturing and trading of ceramic and vitrified wall and floor tiles), with the remaining 8.96% coming from Others (manufacturing of sanitaryware and trading of plywood and block board).
Industry Analysis
The Indian ceramics industry is projected to grow at a CAGR of 8.49% from 2023 to 2028. On a global scale, India is one of the fastest-growing ceramic tile markets.
Some of the major factors driving the growth of ceramic tile demand in India are the expanding real estate sector and government policies promoting rapid growth in the housing sector.
Furthermore, rising disposable income in India, as well as a desire to beautify living and working spaces, are driving the demand for ceramic tiles in the country.
Demand for products such as the new touchless and other hygiene-centric products in bathwater and germ-free tiles will take center stage and gain traction. Government initiatives such as the ‘Pradhan Mantri Awas Yojana’ and ‘Smart Cities,’ among others, are likely to provide additional impetus to the sector.
India is experiencing rapid growth, with an estimated 36% of the population living in cities by 2022. Furthermore, it is expected to reach 40% by 2030, resulting in 600 million urban residents. The expansion of cities and the migration of people are the primary causes of urbanization in India.
Kajaria Ceramics – Financials
Revenue and Net Profit.
The company’s revenue stood at Rs. 4,381.93 crore in FY23 as compared to Rs. 3,705.19 crore in FY22, an increase of 18.26%. Revenue was consistent from FY19 to FY21, and revenue increased in FY22 and FY23.
Net profits were Rs. 346.20 crore in FY23, down from Rs. 382.74 crore in FY22, a -9.54% year-on-year decrease. The CAGR stood at 10.87%. Profits increased from FY19 to FY22 before declining slightly in FY23.
| Particulars/ Financial Year | Revenue from operations (Cr.) | Net Profit (Cr.) |
|---|---|---|
| 2022-23 | ₹ 4,381.93 | ₹ 346.20 |
| 2021-22 | ₹ 3,705.19 | ₹ 382.74 |
| 2020-21 | ₹ 2,780.90 | ₹ 308.90 |
| 2019-20 | ₹ 2,808.01 | ₹ 253.53 |
| 2018-19 | ₹ 2,956.20 | ₹ 228.75 |
| CAGR (4 Years) | 10.34% | 10.87% |
Profit Margins
The OPM stood at 10.26% in FY23 as compared to 13.21% in FY22. The average over 5 years stood at 14.35%. Over the last five years, the OPM has fluctuated, with the highest margin in FY21. The decline in margin was caused by an increase in variable costs such as raw materials.
NPM was 7.86% in FY23 as compared to 10.17% in FY22. The 5-year average was 9.18%. NPM fluctuated over five years. However, the decline in NPM is due to an increase in interest and depreciation costs, as well as the impact on operating profits.
| Particulars/ Financial Year | OPM (%) | NPM (%) |
|---|---|---|
| 2022-23 | 10.26% | 7.86% |
| 2021-22 | 13.21% | 10.17% |
| 2020-21 | 18.29% | 10.64% |
| 2019-20 | 14.81% | 9.03% |
| 2018-19 | 15.20% | 7.74% |
| Average (5 Years) | 14.35% | 9.18% |
Return Ratios
The RoE stood at 15.60% in FY23 as compared to 19.21% in FY22. The average stood at 16.66%. The RoE fluctuated over 5 years. The return in FY23 is below average, with the highest returns in FY22.
RoCE was 20.26% in FY23 as compared to 24.79% a year earlier. The average over 5 years stood at 21.86%. The return ratios indicate that the company has been efficiently utilizing its resources and has given good returns to shareholders.
| Particulars/ Financial Year | RoE (%) | RoCE (%) |
|---|---|---|
| 2022-23 | 15.60% | 20.26% |
| 2021-22 | 19.21% | 24.79% |
| 2020-21 | 17.29% | 22.23% |
| 2019-20 | 15.48% | 18.78% |
| 2018-19 | 15.72% | 23.27% |
| Average (5 Years) | 16.66% | 21.86% |
Debt Analysis
The debt-to-equity ratio has been consistently low over the last five years, with the most recent figure of 0.09 in FY23. The low D/E keeps the capital structure stable and the business’s cash flows intact.
In FY23, interest coverage was 21.64 times, which is at a comfortable level for the company. A higher ratio indicates that the company has earned enough profits to cover interest payments 21 times. It further indicates that the company is in a position to take additional funds for its expansion
| Particulars/ Financial Year | D/E | Interest Coverage |
|---|---|---|
| 2022-23 | 0.09 | 21.64 |
| 2021-22 | 0.06 | 40.62 |
| 2020-21 | 0.05 | 39.54 |
| 2019-20 | 0.08 | 17.01 |
| 2018-19 | 0.08 | 23.97 |
| Average (5 Years) | 0.07 | 28.55 |
Key Metrics
Let us look at some of the key metrics of Kajaria Ceramics Ltd.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | ₹ 1,339.4 | Market Cap (Cr.) | ₹ 21,870 |
| EPS (TTM) | ₹ 24.98 | P/E (TTM) | 55.6 |
| Price to Book Value | 8.84 | Dividend Yield (%) | 0.85% |
| RoE (%) | 15.89% | RoCE (%) | 20.79% |
| Promoter Holding (%) | 47.49% | FII Holding (%) | 18.33% |
| Enterprise Value (Cr.) | ₹ 21,728.40 | Net Profit Margin (%) | 7.86% |
Kajaria Ceramics – Future Plans
- Real estate growth, aided by government support for infrastructure improvements, may aid in business growth in the medium term by providing large land parcels that can aid tile industry growth.
- The expansion of the real estate sector in tier 2 and 3 towns, the emergence of new residential houses, and the demand for Grade-A – Buildings (commercial properties with excellent connectivity) can all contribute to the industry’s growth.
- Reduce reliance on natural gas by increasing the use of biomass, which can help increase production capabilities and contribute to continuous profitable business growth.
Conclusion
As we near the article’s conclusion, we will take a look at the Fundamental Analysis of Kajaria Ceramics in brief. With increased exposure to the real estate sector, Kajaria Ceramics has the potential to scale up to meet demand.
The economy suffers during uncertain times, such as COVID-19, resulting in business downturns, and the company performed better in FY21.
The company has strong fundamentals and revenue growth; however, better cost control can help to increase profitability. What do you think about the company’s growth? Let us know your views in the comments section below.
