Stock Check: Kajaria Ceramics is on a sweet spot amid real-estate revival, says Nuvama; sets record high target price

Nuvama Institutional Equities, a brokerage firm, has maintained its 'buy' rating on Kajaria Ceramics stock and revised the target price to ₹1,754 from the previous ₹1,683. This update comes in light of the sector's recovery and increased demand driven by a resurgence in real estate.

According to Nuvama, following their recent meeting with Kajaria Ceramics top management, they are confident that the company will outperform the industry and achieve a 10–12% volume growth in FY25E. They also expect real estate demand to rebound and anticipate margins for the upper end to be in the range of 15–17% due to a higher value-added share and improved operating leverage. Additionally, the company projects that bathware, plywood, and adhesives revenue will reach ₹6.75 billion, ₹1.25 billion, and ₹1.5 billion respectively by FY27.

In its report, Nuvama mentioned that the company has built an extensive variety of products over the years. The company's strong range of products, aggressive investment in the brand, wide distribution network consisting of 1,600 dealers, and continuous expansion of production capacity have and will continue to be the main factors contributing to the company's superior performance compared to its competitors.

The company's unwavering focus on brands (with a compound annual growth rate of over 30% on advertising spending, compared to its peers' 12-13%; accounting for 2.5-3% of sales) and the strengthening of the value chain are certain to significantly increase its market share.

“Hence, we estimate the company to clock revenue and PAT CAGR of 15% and 32% over FY23-26, respectively, with strong RoE/pre-tax RoCE of >20%,” the Nuvama said.

The brokerage pointed out that the company faces risks from a slowdown in the real estate sector, increasing competition, fluctuations in fuel prices, and the threat of Chinese imports.

Kajaria Ceramics share price

On Monday's session, Kajaria Ceramics share price rose 2%, the stock touched an intraday high of ₹1,478.10, and an intraday low of ₹1,445, on BSE. The brokerage has set a target price of ₹1,754, indicating a potential upside of almost 20% for the stock based on today's closing price of ₹1,472.30.

Kajaria Ceramics stock today was hovering near its 52-week high of ₹1,545, which was achieved on July 30, 2024.

“We are seeing a percent move in the stock and is approaching a key resistance around 1500, once this zone is breached, expect a move towards 1750, immediate support is at 1420,” said Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One.

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