Prabhudas Lilladher has maintained a buy rating on Kajaria Ceramics, citing double-digit volume growth and strategic price adjustments to compete with Morbi-based manufacturers. The brokerage adjusted its target price to ₹1,325, balancing optimism for long-term expansion with current market valuations. Investors are monitoring the company's ability to navigate high fuel costs and the timeline for its upcoming June 2027 capacity expansion.
Prabhudas Lilladher has maintained a positive outlook on Kajaria Ceramics, adjusting its target price to ₹1,325, down from the previous estimate of ₹1,458. This revision comes as the brokerage highlights the company’s ability to outperform the broader domestic tile industry, despite ongoing challenges related to fuel costs and market pricing.
In its latest performance update, Kajaria Ceramics recorded a 10.2% year-on-year volume growth. This figure is significantly higher than the 5% to 6% growth estimated for the Indian tile sector overall, suggesting that the company is successfully gaining market share. Management aims to maintain EBITDA margins in the 18% to 19% range for the second half of the fiscal year, a goal supported by strategic adjustments in product pricing.
A central component of the company's current strategy is narrowing the price gap between its premium offerings and cheaper tiles produced in the Morbi cluster. By implementing price hikes of 12% to 13% across northern and southern markets, Kajaria has reduced the price differential from approximately 40% to a tighter window of 20% to 25%. While this helps protect profit margins, the impact on demand at these higher price points remains a factor for investors to watch.
Operational expansion remains a key part of the long-term growth plan. New facilities at Srikalahasti and Gailpur are scheduled to be commissioned in June 2027. These additions are expected to support revenue growth, with the brokerage forecasting a revenue CAGR of 10.3% and a profit after tax CAGR of 14.6% between fiscal years 2026 and 2029. Additionally, the company expects some relief in gas costs starting in January 2027, which could provide support to the bottom line.
While Kajaria shows resilience, the sector faces specific pressures. The Morbi region, a major competitor, is currently dealing with high gas prices, restricted export activity, and logistics issues, which has historically hampered their production capacity. While this environment creates a relative advantage for established players like Kajaria, investors should remain cautious regarding the execution risks associated with the planned 2027 capacity expansion. The company’s ability to scale its adhesives and bathware segments will also be critical for future revenue diversification. The key monitorable for shareholders will be the actual commissioning of the new plants and whether the company can sustain its volume growth in an environment of fluctuating fuel prices.