Kajaria Ceramics shares rallied 9 percent intraday Friday as ICICI Securities upgraded the stock after second quarter earnings. The stock rally was in addition to 7.6 percent upside seen in previous session.
Kajaria management has guided for better performance in second half of FY19 in recent media interaction. They have guided for 14-15 percent volume growth and EBITDA margin of 16 percent+ in H2FY19E.
In the context of improving financial performance and the recent correction in the stock, Kajaria is currently available at an attractive valuation of 21x FY20E EPS, ICICI Securities said.
Hence, the research house upgraded recommendation on the stock to buy with a revised target price of Rs 450 (around 24x FY20E EPS).
Company’s topline grew 8.1 percent YoY to Rs 725.3 crore mainly led by volume growth (grew 10.5 percent YoY) and was almost in-line with ICICI’s estimates of Rs 712.9 crore.
EBITDA margin contracted by 316 bps YoY to 15 percent on account of higher power & fuel costs and other expenditure
Reported PAT declined by 11.1 percent YoY at Rs 50.2 crore. Adjusting for exceptional loss of Rs 3.4 crore on sale of stake in Soriso Ceramics, the net profit stood at Rs 54 crore, which is marginally better than estimate of Rs 49.6 crore, ICICI Securities said.
On other operating parameters, working capital cycle increased to 59 days in Q2FY19 (57 days in Q1FY19).
At 15:00 hours IST, the stock was quoting at Rs 385.60, up Rs 24.35, or 6.74 percent on the BSE.