“Kajaria Ceramics Limited (KCL) is the largest manufacturers of ceramic/vitrified tiles in India and has carved out distinct brand equity in the same. It has a capacity of 30.60 mn sq meter (MSM) (across 3 plants - Sikandrabad in Uttar Pradesh, Gailpur in Rajasthan and Morbi in Gujarat). It has increased its capacity from
1 MSM to 30.60 MSM in last 22 years and offers more than 400 options in ceramic wall & floor tiles, vitrified tiles, designer tiles and much more. The Indian ceramic tiles industry is the world’s largest producer as well as consumer after China and Brazil. The 550 MSM domestic ceramic tile industry was estimated to be worth Rs.130 bn as on March, 2011, growing at a CAGR of ~15%. India’s per capita tiles consumption is a mere 0.42 sq. m while the world average is three times higher at 1.20 sq. m and China’s average is more than five times higher at 2.26 sq. m. Demand for tiles is expected to grow rapidly because of the following reasons: - (1) Increasing middle-class & rising population, (2) Improved disposable incomes and (3) Growth of replacement market in rural and semi-urban markets. KCL is the 2nd largest tile company (turnover wise) with around 15% share in the organized market and is very well placed to benefit from the strong growth being witnessed in the tiles industry.”
“Kajaria has recently expanded its capacity to 30.6 MSM, led by a 6 MSM brownfield expansion (March 2011) at Gailpur to manufacture vitrified tiles (glazed and polished) & a 2.60 MSM vitrified capacity (conversion from ceramic tiles) at Sikandrabad (commenced operations in March 2011). In the last 15 months, KCL added 11 MSM of vitrified tiles capacity, the largest by any single company in India. Given its market positioning, demand growth & high capacity utilization, KCL’s volumes are expected to expand substantially following these expansions. In India, the branded tiles segment is gaining market share owing to rapid capacity addition and shift to value-added products, which explains the 20% growth of the top 10 players as against the industry average of 15%. KCL has one of the largest distribution channels in India with 800 dealers (apart from their network of sub-dealers) that help in better market penetration. To leverage their strong distribution network and brand competencies, apart from adding capacities in the high end vitrified tiles category, KCL has also forayed into many high-end sanitaryware segments which positions the company as a complete bathroom solution provider and has also established a foothold in high-value wooden flooring solutions. This will help KCL to accelerate its market share in the high-end segment, grow its volume strongly and will also enable it to address newer segments, where it was previously absent.”
“Historically, the Indian tile companies have had a low asset turnover ratio, as the cost of machinery was very high. However, with the foray of Chinese companies into machine manufacturing in the recent past, the prices of Italian machines have also come down substantially. Apart from this, KCL’s focus higher end products, has helped it improve realizations. These factors have turned out to be game changers for the company as it has been able to improve margins, reduce leverage and report better ROCE/ROE. The ROCE and ROE for FY11 has improved to 24.9% & 29.5% respectively from 18.9% & 20.4% respectively in FY10.”
“KCL has performed exceedingly well in the past few years on the back of rising tiles demand, its strong brand & distribution network, focus on value added products & consistent expansion in its capacities. Given its strong market positioning, increased capacities of its vitrified tiles, foray into new product lines of high end sanitaryware & wooden flooring segments, we expect KCL to deliver strong growth over the coming years. Going forward, we expect its Revenues and APAT to grow strongly by 23% & 21% in FY12 & 17.5% and 20.3% in FY13 respectively. We initiate our coverage on the Company with a “HOLD” rating and a target price of Rs 120 (10x FY13E EPS of Rs.12),” says Sushil Finance research report.
....more info
1 MSM to 30.60 MSM in last 22 years and offers more than 400 options in ceramic wall & floor tiles, vitrified tiles, designer tiles and much more. The Indian ceramic tiles industry is the world’s largest producer as well as consumer after China and Brazil. The 550 MSM domestic ceramic tile industry was estimated to be worth Rs.130 bn as on March, 2011, growing at a CAGR of ~15%. India’s per capita tiles consumption is a mere 0.42 sq. m while the world average is three times higher at 1.20 sq. m and China’s average is more than five times higher at 2.26 sq. m. Demand for tiles is expected to grow rapidly because of the following reasons: - (1) Increasing middle-class & rising population, (2) Improved disposable incomes and (3) Growth of replacement market in rural and semi-urban markets. KCL is the 2nd largest tile company (turnover wise) with around 15% share in the organized market and is very well placed to benefit from the strong growth being witnessed in the tiles industry.”
“Kajaria has recently expanded its capacity to 30.6 MSM, led by a 6 MSM brownfield expansion (March 2011) at Gailpur to manufacture vitrified tiles (glazed and polished) & a 2.60 MSM vitrified capacity (conversion from ceramic tiles) at Sikandrabad (commenced operations in March 2011). In the last 15 months, KCL added 11 MSM of vitrified tiles capacity, the largest by any single company in India. Given its market positioning, demand growth & high capacity utilization, KCL’s volumes are expected to expand substantially following these expansions. In India, the branded tiles segment is gaining market share owing to rapid capacity addition and shift to value-added products, which explains the 20% growth of the top 10 players as against the industry average of 15%. KCL has one of the largest distribution channels in India with 800 dealers (apart from their network of sub-dealers) that help in better market penetration. To leverage their strong distribution network and brand competencies, apart from adding capacities in the high end vitrified tiles category, KCL has also forayed into many high-end sanitaryware segments which positions the company as a complete bathroom solution provider and has also established a foothold in high-value wooden flooring solutions. This will help KCL to accelerate its market share in the high-end segment, grow its volume strongly and will also enable it to address newer segments, where it was previously absent.”
“Historically, the Indian tile companies have had a low asset turnover ratio, as the cost of machinery was very high. However, with the foray of Chinese companies into machine manufacturing in the recent past, the prices of Italian machines have also come down substantially. Apart from this, KCL’s focus higher end products, has helped it improve realizations. These factors have turned out to be game changers for the company as it has been able to improve margins, reduce leverage and report better ROCE/ROE. The ROCE and ROE for FY11 has improved to 24.9% & 29.5% respectively from 18.9% & 20.4% respectively in FY10.”
“KCL has performed exceedingly well in the past few years on the back of rising tiles demand, its strong brand & distribution network, focus on value added products & consistent expansion in its capacities. Given its strong market positioning, increased capacities of its vitrified tiles, foray into new product lines of high end sanitaryware & wooden flooring segments, we expect KCL to deliver strong growth over the coming years. Going forward, we expect its Revenues and APAT to grow strongly by 23% & 21% in FY12 & 17.5% and 20.3% in FY13 respectively. We initiate our coverage on the Company with a “HOLD” rating and a target price of Rs 120 (10x FY13E EPS of Rs.12),” says Sushil Finance research report.
....more info