ICICI Direct Picks Mid Cap Building Materials Stock To Buy For Greater Returns, Margins Set To Improve

ICICI Direct has picked mid cap building materials sector stock, Kajaria Ceramics Ltd and assigned buy call with a target price of Rs 1340 implying an upside of 22% in a target time of 12 months. The current market price of the stock is Rs 1102 apiece with an intraday surge of 0.52%.

The management has guided for ~15% YoY volume growth in the tiles segment during FY23, implying ~11% in H2FY23 with October, 2022 being relatively soft amid festivities, said ICICI Direct. Check key takeaways below:

1. Kajaria Ceramics Ltd Share Performance & Return

The last trading price of the stock is Rs 1102 apiece with 52-week high at Rs 1379 and 52-week low at Rs 886 apiece. The stock has rallied 116% in last 3-years, and 53% in last 5-years. In last 1-year, the shares of Kajaria Ceramics witnessed a decline of 10%.

2. Key Triggers For Future Price Performance

According to ICICI Direct, "We expect ~12% CAGR in tiles volume and realisations CAGR of ~3%, resulting in tiles revenues CAGR of ~16% over FY22-25 to Rs 5237 crore. The increased dividend payout (~45% vs. 20-25%, earlier) is likely to improve return ratios (RoCEs likely at 25%+ in FY25E vs. ~21% in FY22)"

3. Valuation

According to ICICI Direct, "Kajaria's share price has grown at ~9% CAGR over the past five years. Kajaria with a net cash balance sheet and superior brand, is a solid play on the tiles sector with expanding reach to tier II/III cities. We maintain our BUY rating on the stock. We value Kajaria at Rs 1340/share, at 36x FY25 P/E."

4. About Kajaria Ceramics

Kajaria Ceramics is the largest manufacturer of ceramic/vitrified tiles in India with current annual capacity of 84.5 million square meters (MSM). Apart from completed capex of Rs 250 crore on tiles, it is adding 3 MSM brownfield capex in Sikandrabad (~Rs 81 crore capex) and setting up a plant of 8 MSM in Nepal in JV with an investment of ~Rs 125 crore.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.