Kajaria Ceramics: Kajaria Ceramics Q3 profit tanks 41% YoY to Rs 73.66 crore on weak operating performance, tepid topline growth. Revenue grows 2.1%. The ceramic and vitrified tiles manufacturer has registered a 41% year-on-year growth in consolidated profit at Rs 73.66 crore for quarter ended December FY23, as operating numbers were down. Consolidated revenue grew by 2.1% YoY to Rs 1,091.1 crore for the quarter. On operating front, EBITDA was down by 27.6% to Rs 133 crore and margin fell by 5 percentage points to 12.2% for the quarter compared to same period last year.
Shares of Kajaria Ceramics fell 5 percent on January 30 after its Q3 profit tanked 41 percent on-year to Rs 73.66 crore because of weak operating performance and tepid topline growth.
At 12:30pm, the stock was quoting at Rs 1,044 on the NSE, lower by 4.9 percent. It was trading below its 5-day, 10-day, 20-day simple moving averages.
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The tile manufacturer and a leader in the building materials segment saw its consolidated revenue grow by only 2.1 percent on-year to Rs 1,091.1 crore for the quarter. On the operating front, EBITDA (earnings before interest, taxes, depreciation and amortization) was down 27.6 percent to Rs 133 crore and margin fell by 5 percentage points to 12.2 percent over the same period last year.
The key reason behind the weak performance was muted offtake. Tiles sales went down 1 percent on-year at 25.5 million square metres (MSM) on the back of extended monsoon and festive season and demand continued to remain sluggish in January, said the management.
Fuel cost for the company remained elevated, which dented the operating performance. Fuel is used to fire the kilns in ceramic plants. In Q3FY23, the cost for the company was Rs 53 per standard cubic meter (scm) versus Rs 56/scm in previous quarter. Total expenses for the quarter jumped 10 percent on-year.
Biofuel to support earnings
Going ahead, the company expects the Q4 fuel cost to come in at Rs 47‐48/scm. This will happen on the back of the management deciding to use biogas and LPG in its fuel mix.
"By February 2023, around 65-70 percent of its fuel mix will be natural gas while the remaining 30-35 percent will be alternate fuel (biogas) and some LPG," ICICI Securities said.
This comes as a welcome change as the management had earlier said that with the kind of volumes the company deals with, it couldn't use propane or LPG. "We have to run on line gas,” it had said.
The ceramic maker will be using biofuel at its plants in Sikandarabad and Gailpur.
"Kajaria, with a net cash balance sheet and superior brand, is a solid play on the tiles sector with expanding reach to tier II and III cities. With the gas price easing and alternate fuel use, margin recovery is on the anvil," noted domestic brokerage ICICI Securities.
It has a 'buy' rating on the stock with a target price of Rs 1,310.
Yes Securities has a 'neutral' rating with a target price of Rs 1,122 apiece. "The company’s tile volumes and revenue to grow by 11 percent and 16 percent CAGR over FY22‐24 owing to better demand from FY24. Biofuels will enable the company to improve margins," it said.
JM Financial has retained its 'buy' rating with a target price of Rs 1,230 on the stock. It is bullish on the company's strong distribution network, that is set to grow by another 450-500 dealers in the next three years.
However, it has cut the FY23/24/25 estimates by 8.2 percent/7.2 percent/9.2 percent.
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