Kajaria Ceramics’ strong volume led the growth in Q2FY22

Kajaria’s upbeat performance was led by strong volume, capacity utilization at 100% and comfortable transfer of steep gas cost. 
The company reported a revenue growth of 37% YoY (Rs. 9.7bn) and 20% in H2FY22, volume growth of 25% YoY and 15% in H2FY22, realisation growth of 8% YoY, total sales volume clocked at 24.8msm (which includes 12.6msm from own, 5.7msm from JV and 6.5msm from outsourcing), and EBITDA marginally grew 18.5% (contracting 163bps) due to increase in gas prices.  The net cash balance stood at Rs. 4.7bn as on September 2021 vs Rs. 3.5bn in March 2021. Net working capital slipped from 50 days in March 2021 to 56days in September 2021 caused by higher inventory.

Company witnessed a 20% revenue growth in tiles, revenue for sanitaryware/faucetware stood at Rs. 3bn and revenue for ply stood at Rs. 0.8bn for FY22. The company plans on indigenous production of some high value products that will be imported which will help improve the revenue and bring down imports gradually. 

Another gas price hike of Rs. 10-15/scm in next 15days is expected from Morbi. The gas prices for Kajaria are lower by Rs. 10-12/scm compared to Morbi players. Gas prices in North India stand at Rs. 38/scm, while in South India at Rs. 60/scm. Kajaria hiked prices gradually in YTDFY22; in April by 2-3%, July by 3%: and October by 4%. 

The company chalked out three brownfield projects at Gailpur; 4.2msm at Rs. 600mn, 3.8msm at Rs. 1.1bn and 4.4msm at Rs. 800mn. The total capex value would stand between Rs. 2.5-2.7bn for FY22E and at peak utilization, it would generate value worth Rs. 5bn. They are set to be operational in Q4FY22. 

Moving ahead, Kajaria has increased its dividend payout policy from 15-20% to 40-50% payout. Company has also announced an interim dividend of Rs. 8/share. It will continue to gain market share on the strong base of its industry leadership, strong brand recall, and healthy profitability matrix.