Kajaria Ceramics Limited (500233) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Kajaria Ceramics Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pranav Mehta from Equirus Securities Private Limited. Thank you, and over to you, sir.

Yes. Thank you, Sumit. Good evening, everyone, and thank you for joining this call. From the management side, we have Mr. Ashok Kajaria, Chairman; Mr. Chetan Kajaria, Vice Chairman; Mr. Rishi Kajaria, MD; and Mr. Sanjeev Agarwal, CFO. I now hand over the call to Ashok for the initial remarks, post which [ we will have a question-and-answer session ].

Thank you, Pranav. Good evening, everyone. It gives me great pleasure to welcome you to the quarter 1 FY '27 Earnings Conference Call of Kajaria Ceramics Limited. Joining me on this conference call is the senior management team of Kajaria Ceramics. In spite of the recent geopolitical disruption in the Middle East, coupled with a more favorable demand-supply environment for the ceramic tile industry in Morbi, we remain optimistic about our business outlook for the year FY '27. The performance in quarter 1 F '27 has broadly validated our expectations and provides a strong foundation for the year ahead. In quarter 1 F '27, we achieved a 6% year-to-year volume growth in spite of a soft April. However, consolidated revenue grew by 20% to INR 1,328 crores compared to the corresponding quarter last year, mainly due to increase in selling prices because of fuel impact. EBITDA margin for the quarter stood at 19.60%. Apart from a brownfield expansion of 10 million square meters of our Srikalahasti manufacturing facility announced last quarter, we have also decided to put up a further 11 million square meters line at our Gailpur, Rajasthan facility that will deliver cost-effective, high-quality products. Beyond tiles, two verticals are evolving from [ adjacent ] into pillars. Kerovit, our Bathware brand, is scaling with purpose. The decision to acquire the remaining 15% stake from Aravali Investment Holdings is an unambiguous statement of long-term commitment to building a market-leading bathroom solutions brand. And our Adhesives business is on track to grow at a much faster pace. As the price differential between national branded players and their informal counterparts have narrowed and consumer preference is expected to shift decisively towards branded products, a secular tailwind that positions Kajaria favorably going forward. Looking ahead, we remain confident that the company is well positioned to sustain quality growth and create long-term value for all stakeholders. Let me review this quarter's segment-wise financial performance. Tiles segment revenue grew by 18% year-to-year at INR 1,162 crores in quarter 1 '27 compared to INR 986 crores in quarter 1 F '26. Bathware segment registered a 33% growth in revenue, reaching INR 122 crores in quarter 1 F '27 compared to INR 91 crores in quarter 1 F '26. Revenue from Adhesives grew to INR 45 crores in quarter 1 F '27 as compared to INR 25 crores in quarter 1 F '26. EBITDA improved in [ quarter 1 F '27 ] to 19.60% as compared to 16.72% in quarter 1 F '26. Profit before share of profit loss from JV, exceptional items and tax grew to INR 230 crores in quarter 1 F '27 as compared to INR 149 crores in quarter 1 F '26. PAT for the quarter grew to INR 169 crores in quarter 1 F '27 as compared to INR 109 crores in quarter 1 F '26. As of 30th of June '26, the working capital cycle also improved by 5 days to 46 days compared to 51 days on 31st of March '26. And we will continue to focus on a lean working capital cycle going forward. With this, I take this opportunity, thanking you for joining us today. Over to moderator, please.

[Operator Instructions] The first question is from the line of Praveen from PL Capital.

Many congratulations for a very good set of numbers. My first question is related to the pricing. As you also highlighted, there is a price hike and the overall 11% of increase in the realization. So can you give us some more color on that? How much is -- actually in the segment-wise, the price hike you have taken? And the way forward also, where you are seeing these price hikes to continue?

See, two things have happened after the war on 28th of February. The prices of gas at Morbi went up drastically because GSPC is the only supplier. In as far as Kajaria is concerned, we have 3 plants in Morbi. We have 3 plants in North and 2 plants in South. In North, we are taking the gas from Delhi. In South, we are taking gas from 2 CGD companies, one is [ Think Gas ] and the other is another CGD company. What has happened in Morbi, the gas prices went up from literally about INR 48 to INR 86 to INR 88 per SCM, whereas in North, the price hike was approximately about 10% -- 10% to 12%. As a result, the cost increase in Morbi was much more than what has happened in North. In Morbi, they have increased the prices by almost 40% to 45%. In North and South from our plants, which we are manufacturing, we have raised prices by anywhere between 10% to 11%. As a result, the gap has come down drastically. So that's the current situation. What -- as we all know, gas market is very volatile with the war still on. One day, there is no war. Second day, the war is on. And the situation is very, very volatile. Looking at that, we'll keep watching and see what happens. But the situation as of today is very positive as far as Kajaria is concerned because of the multi-location plants that we have.

Perfect, sir. Sir, second question related to that, is the volume, 6% of growth in the volume we had seen. And still, there is a lot of volatility in terms of the gas supply and all we are seeing. So where you are seeing this volume growth to be in the next 9 months?

If you recall, last 2 quarters, we have not given any volume guidance. But this year, with a lot of confidence, we are saying next 9 months, we'll have a double-digit growth. Double-digit volume growth.

Okay. That's good to hear, sir. Last question is related to the CapEx because two CapEx announcements happened for INR 210 crores and INR 165 crores. And also, there is a renewable acquisition of INR 12 crores. So can you give a '27 and '28 CapEx, how much is going to be out of INR 387 crores of our total CapEx of all these? And also the maintenance CapEx, if you can?

This year, we are looking at a CapEx of roughly INR 400 crores because part of the CapEx which we are doing in 2 plants partly will come here, partly will come next year. This year, the CapEx plan is roughly about INR 400 crores.

Okay. Okay. So there is some maintenance CapEx included in this?

All included. All included. All included.

The next question is from the line of Keshav Lahoti from HDFC Securities.

Sir, it's heartening to see you giving double-digit volume growth guidance after a [ long given ] some guidance. Just want to firstly understand from where this confidence is coming, what are you -- what insights you're getting it from? And secondly, July also, we have seen a similar trend?

This is Rishi Kajaria. So why -- so as we said, our April was a little soft. But May and June, we did have a full volume growth, and the same trend continues in July. So at one side, we are strengthening our complete distribution strength. And also another lever for growth which we have now really working -- started working on is projects, which will give us that additional volume. I will not -- just to give you the information that we have just had a major breakthrough with two of the very, very big builders of India, where we are getting a lion's share. So looking at the distribution strength of ours and this additional lever of projects, we feel that we are bound to do a double-digit growth this year. That gives us the confidence.

Understood. Got it. And secondly, how are the margins looking this year? And this quarter, you have already [ said ] the [ INR 250 crore ] EBITDA mark. Possibly, can we hit the INR 1,000 crore mark this year? And by when the promoter will be taking the promoter remuneration, which a few quarters take a call, we don't want to take it?

So we are looking at an EBITDA margin about 18% to 19% for the entire year. First quarter, we already got 19.6%. So we are quite confident we'll look at those numbers for the entire year. We are looking at INR 1,000 crores plus EBITDA overall.

Got it. Just a small clarification. By EBITDA, you include other income or not? And secondly, as you hit the INR 1,000 crores mark possibly maybe next year, promoter will start withdrawing the remuneration?

Other income is not part of EBITDA. It's operating EBITDA. And promoter in the last con call have already clarified that they are not going to take [ salary ] for this financial year.

[Operator Instructions] The next question is from the line of Sneha from Nuvama.

A couple of questions from my end. Firstly, I wanted to gauge how is the demand on ground. You said that April was weak and May and June recovered. Could you help us with the understanding where was the peak, maybe region-wise, Tier 1, Tier 2, Tier 3? Or was it a broader slowdown? And what are the reasons according to you? And are we seeing a pickup back again in the current month?

See, April was soft for three reasons. And we all are aware why it was soft. One, there was the total shutdown of Morbi in the month of April, number one. The Morbi manufacturing closed on 5th of March and was literally closed till 15th of April. Some plants started only -- 10% of the plants started in the month of April, mid-April, 16th of April. So Morbi, there was a total shutdown, number one. Number two, in the month of March, all the dealers across India lifted something, more quantities for a simple reason that they knew that the prices will go up from 1st of April. And third, there was a labor shortage across the country for two reasons. One was the elections in the country. And secondly, there was an LPG shortage. So they all went back to their destination and said let this problem ease out and we'll come back again. So these are the reasons. Already in the month of May and June, things have started positively, and so is in the month of July, which is just about to close. So demand at the local -- at the normal level in the domestic market is very, very -- looking very optimistic.

That's great to hear. Second question is regarding CapEx. We have seen a renewed CapEx. You are putting up additional CapEx in your own facilities. Where is softness coming up from? Because earlier, the thought was largely to take it from JV route from Morbi or even outsourcing. What is the kind of margin differential, let's say, between your own plants and JV, and which model is working better and why?

Chetan here. So we have two CapExs coming up, which we announced. First is the Srikalahasti expansion in South at a cost of INR 210 crores, which we announced in the last Board meeting. And second is the expansion at our [ Bhiwadi ] factory in Rajasthan that was INR 155 crores, which will happen in this financial year and spill over to by April '27, it will be completed. So these are the two major CapExs we are looking at for increasing our sales. What was the second question?

I just wanted to understand why sudden renewed CapEx interest? What sort of margin difference do we make between the Morbi manufacturing as well as the South or the North manufacturing?

Sneha, the thing is that this time, this is a new technology. This is the latest plant we are putting both at Srikalahasti and Gailpur, where the CapEx is much lower, what we used to do earlier. So the turnover which we'll be getting from the both the CapEx will be more than 2x. And the OpEx -- and it will be not only the CapEx efficient, but also the OpEx efficient. The cost of production will also be lower. So incrementally, they will be highly ROC accretive, and we'll get much more margin what we are getting with our existing manufacturing facility.

This was helpful. Thanks a lot.

Sneha, one more thing that -- the decision of putting up the plant and outsourcing is also based on the geography. So we are finding good demand in North. To cater to the northern demand, we have to put up -- we are putting up the plant. And this plant, we are putting up 10, 11 million plant for INR 165 crores, which will give us a turnover of more than INR 400 crores to INR 450 crores [ better margin ]. So outsourcing, we will use it to utilize our full capacity. But going forward, as we have to grow, we aim to grow in double digits. So it will help in meeting the sourcing requirement from these two plants.

The next question is from the line of [ Visha ] from [ Prainitha ] Asset Managers.

Just a couple of questions from my side. How is the demand tracking across the retail channel versus the institutional sales? And is there any real estate linked demand that you are seeing currently a growth driver? And is there any sign, estimation of softness in this current quarter?

So as I mentioned before, the demand is coming from both retail as well as institutional. Our focus was less on institutional earlier, but now we are focusing on both the segments together to get a better growth volume. So we are strengthening our distribution and dealer network, as well as we are being aggressive in projects to gather more market share.

Just one more question, that what's the current export contribution to revenue? And is there any change in the strategy? Given that there is a global trade uncertainty and tariff uncertainty this year. So is there any going to be shift to the concentration to domestic?

We are a domestic consumption story. We don't want to go to exports. Our exports are less than 1% of our overall turnover. And we are very bullish on the Indian market, and we want to focus all our energy and effort here. So we are not looking at the export market at all.

The next question is from the line of [ Saugat ] from [ Moreen ] Research.

My first question is the Board has approved additional 11 MSM capacity expansion at Gailpur. Could you help us understand the clear driver behind this investment. Is this expansion based on the strong demand visibility in the next few years? Or is the company positioning itself ahead of the next housing and real estate upside?

So the driver is the market demand from the North and Eastern markets, which Gailpur plant caters to. Due to the price increase of gas prices in Morbi, which is a [ cluster ], the price differential from Kajaria and the Morbi has decreased. This is given to an increased demand for our products in the Northern and Eastern markets. In that demand scenario, you have Gailpur expansion in our Rajasthan plant.

Okay. The next, could you share the number of dealers added during the quarter?

Pardon? No, no, it's confidential. There's not a number of dealers in the quarter. Yes. overall, we have 1,800 dealers approximately. Out of this, 450 dealers are exclusive. As we go down in the year, with this change, we are expecting another 100 dealers to add out of which, this time, 50 will be exclusive. We are focusing more on exclusive Kajaria dealers.

Yes. And how do you think about the dealer productivity over the next 3, 4 years? Do you expect growth to come primarily from adding dealers or increasing existing dealers?

See, automatically with the addition of the demand, see, one thing you are not able to get right now, the difference between Kajaria and Morbi has minimized. What was being sold from Morbi to a Morbi dealer and Kajaria dealer has minimized. If the gap earlier was 40%, today it has come down to 20%, number one. Number two, there are three kinds of customers in the country. One is a guy who is going for branded only. He will buy Kajaria, Somany or Johnson. There is a guy who says I want cheap. He will buy a Morbi product. There was another set of people who are saying, where do I go? Where do I go, to branded, or I go to Morbi? Difference being many will prefer a branded because you make a house once in 5 years, 10 years, 20 years. So they will go for branded. As a result, our sales have started going up, which we have seen as a result, which is resulting in what we are talking about. And as a result, we felt it is the right time to go for such a market expansion, number one. Number two, as you might have heard just now, we are -- in Gailpur, we are talking about an increase of 11 million square meters at INR 165 crores. If I take you back 2 years back, 5 million square meters used to cost INR 150 crores. So this is a big change which is happening with the latest technology that we are putting up the plant.

In our Nepal site, tiles market estimated around INR 200 crores and INR 500 crores. [indiscernible] tiles?

[indiscernible].

[indiscernible] tiles market Kajaria is targeting? In Nepal?

Please come in the queue again. Let other people ask the question. You already asked a question.

[Operator Instructions] The next question is from the line of Pankaj from IKIGAI Asset Manager.

Congratulations on good set of results. My first question is that when I look at the last 3 years, the sales growth for us has been an inspiring 3%, 4%. I see a renewed confidence in the commentary of growth. In order to visualize the size and scale of the company, it will be great if you can give a slightly medium-term outlook, where you see the size and scale? And my second question is, when I was looking at social media a few weeks back, I think you guys had a sales meet and where you could see INR 6,000 crores number on the top line for this year, or I don't know, next year. So some granularity on what is giving the confidence of growth and how the size and scale of the company will look like in the next 3 years, last 3 years has not been great. What are the big changes internally, externally you are seeing, which is giving us the growth confidence? It will be really helpful.

Thank you very much. I take you back to April '25, when the big change happened at Kajaria. What happened? We did a job of unification. They had 3 different verticals, ceramics, polished vitrified tiles and glazed vitrified tiles, and we combined it to 1. So what happened last financial year was there was a lot of cost cutting at various stretch, but volume didn't come because there was a lot of corrections to be made. The volume -- real volume growth came in the quarter 4, when we grew at about 11%. As a result, what happened, two things happened. One, the organization become much leaner than it was. A lot of people [ went ] because there were 3 verticals operating. So instead of 3 verticals, now there is only 1 vertical that is tiles. And it has now started yielding results. So that is the confidence which we got, number one. And the confidence is not that what we got, the confidence we got is the sales, resulting in larger sales. As I said just now, in the month of April, it was soft because of 3 reasons. In the month of May, June and now July, which is also just the fact in last year by July, things have started improving, we are seeing a double-digit growth. So looking at that, we see that next 3 years is going to be very, very positive for Kajaria, and that is why these expansions are coming.

Okay. And on the external front, Morbi was very competitive all throughout. But what is happening around? In terms of pricing, do you see a structural change there where the shift from unorganized to organized has started to happen? Anything which is also acting as a tailwind there? Can you help us on that front as well?

We will wait and see. You see, the gas market is very volatile today. One day, there is a war, next day, there is no war. You have to understand this thing that in Morbi, there is only one gas supplier that is GSPC, which is partly importing on spot and partly taking gas from GAIL and [indiscernible]. Here, we are getting gas from GAIL, which is a much, much bigger player as far as gas is concerned, and then CGD companies in South. So right now, that situation, how it will come, who will -- how they will become more organized and all that, it's too early to say because right now, they are in trouble as it is because they do not know whether -- what gas prices will be tomorrow, whereas there is some certainty from GAIL side and the gas.

That's helpful. And last question was that when I look at the market feedback at the ground level, the demand for slabs has been going up at a much faster pace in the initial time we missed that opportunity. How do you see that going forward for us in terms of our capacity, capturing market share there where Somany and Simpolo have done a great job? So from a slab perspective, how do you see our opportunity and that becoming a large portion of our product mix? That will be my last.

I fully agree with you. That is why we are putting up these large capacities. See, your question is a very valid question that Kajaria missed out. We do agree. But this is why we are putting up these large capacities to meet the requirement of bigger sizes. And a state-of-the-art plant, both are state-of-the-art plants.

The next question is from the line of Ritesh from Investec India.

Sir, my first question is just wanted to understand why is the difference in CapEx intensity between the 2 plants that you have indicated?

The CapEx, the difference is because in Gailpur, the shed is already there. So that's why the cost is less. It is exactly the same plants which we are putting in both the factories. But in Srikalahasti, we are putting up a brand-new shed. We have to make a 8.5 lakh square feet new shed, whereas in Gailpur, it is an extension of the existing shed. So that is the difference of the CapEx.

That would be almost like INR 45 crores?

Yes. So in Srikalahasti, we're spending almost about INR 80 crores on the shed, INR 80 crores to INR 90 crores. And in Gailpur, we'll be spending about INR 40 crores to INR 50 crores on the shed.

Okay. My second question is just a continuation of what Pankaj was asking you. If you could highlight basically, what is the technology or any different type of tiles or sizes that we are looking at this particular expansion? Is it the historical [ sakmi ] and continual lines? Or is it something else that we are looking at it from a technology standpoint, which will actually help us on differentiating the product incrementally?

So I tell you, the biggest differentiating factor is the volume. Earlier, as you just mentioned, a 5 million to 6 million square meter plant used to cost about INR 150 crores, INR 160 crores. Now in INR 370 crores, we'll get almost 22 million square meters. So we are focusing on capacity as the #1 point. And with that, we'll have the flexibility whatever machinery we buy, whether it is [ sakmi ], whether it is [ Chinese ], we have a mix of combination of both. We'll produce the best quality tiles where we have an option of all the sizes.

But is there anything different from a printer or a kiln standpoint which will differentiate our products versus what we have currently? So is it just scale basically that we are referring to over here?

No, so what's happened is the kiln size has increased. Earlier, we used to put a 200-meter kiln. This time, we are putting a 340-meter kiln. That's one. With either a [ Cerus press ] or a hydraulic press, [indiscernible] that doesn't make a difference. So based on that, our technical team is working on all those things. But our first priority is to go for a higher volume capacity. And that is the way we get a very good cost where we can get a much better share in the market.

Sure. And my last question is, would it be possible for you to quantify rupees per SCM for North, West and South? I think for Q1, we have given numbers of 55, 47 and 49.6, please correct me if I'm wrong. If you could help us with the numbers for Q1? And likewise, what it is on a spot basis?