Kajaria Ceramics gains on tile pricing, volume recovery and new GVT capacity

Investment View and Valuation

ICICI Securities, in its August 3, 2026 result update on Kajaria Ceramics, retained its BUY recommendation and revised its target price to Rs 1,430, valuing the stock at 35 times FY28E EPS. Kajaria Ceramics is described as India’s largest ceramic and vitrified-tile manufacturer, with annual capacity of 87.8 million square metres across India and Nepal.

The broker’s positive view is based on recovering tile volumes, improved pricing, industry-leading margins and return ratios, capacity additions, and expansion of both retail and institutional distribution.

Robust Q1FY27 Operating Performance

Kajaria Ceramics reported strong operating performance in Q1FY27. Revenue rose 20.4 per cent year-on-year to Rs 1,328.1 crore, while tile sales volume increased approximately 6 per cent to 28.8 million square metres. Tile revenue grew 17.7 per cent to Rs 1,161.5 crore, supported by an 11.1 per cent year-on-year increase in realisation following price increases to offset higher gas costs.

The report narrative separately cites PAT of Rs 171.1 crore, up 56.4 per cent year-on-year. The increase in realisation reflected price hikes implemented in response to higher gas costs.

Demand Recovery and Management Outlook

Management guided for double-digit tile-volume growth over the next three quarters of FY27 and maintained FY27 EBITDA-margin guidance of 18-19 per cent. EBITDA is expected to exceed Rs 1,000 crore, while bathware revenue is expected to grow 35-40 per cent in FY27.

• Demand was soft in April because of the Morbi cluster shutdown caused by gas unavailability, election-related labour shortages and higher gas prices elsewhere.
• Management said demand improved after April and remained favourable into July.
• GVT demand was strong, while PVT demand was weak and ceramic-tile demand remained concentrated in wall tiles.
• Industry tile exports were approximately Rs 3,000 crore in Q1FY27, affected by the Morbi shutdown and the Middle East conflict. Management estimated FY27 industry exports at approximately Rs 12,000 crore.

Distribution Expansion and Capacity Additions

Kajaria Ceramics has partnered with two large Indian developers to increase its institutional presence while continuing its retail expansion. The company had approximately 1,800 dealers and 450 exclusive dealers, and management planned to add around 100 dealers, including about 50 exclusive dealers.

The board considered an Rs 165 crore brownfield GVT expansion at Gailpur, adding 11 million square metres of capacity and targeted for completion by April 2027. Together with the previously announced 10 million square metre Srikalahasti expansion, which carries a cost of Rs 210 crore, planned FY27 capital expenditure is approximately Rs 400 crore.

Management said the new technology at these plants should lower production costs and generate higher margins than existing captive manufacturing plants.

Pricing, Costs and Balance Sheet

Pricing remains an important support to the investment case. Kajaria raised prices by 10-11 per cent in North and South India, while Morbi players raised prices by approximately 40-45 per cent amid sharper gas inflation. Management said the tile-price gap between organised and unorganised producers had narrowed to about 20 per cent from around 40 per cent previously, supporting demand for organised manufacturers.

• Working capital: Q1FY27 working-capital days improved to 46 from 59 in Q1FY26, driven by lower inventory and receivable days.
• Net cash: Rs 985 crore.
• Blended gas price: Rs 71 per standard cubic metre in Q1FY27.
• Regional gas prices: Rs 64 in North India, Rs 85 in Morbi and Rs 70-73 in South India.

Kajaria’s manufacturing footprint across Morbi, North and South India was cited as reducing its exposure to Morbi’s single gas supplier.

Broker Estimates and Earnings Revisions

ICICI Securities forecasts tile-revenue CAGR of 10.5 per cent over FY26-FY28E, reaching Rs 5,227 crore. Tile-volume CAGR is estimated at 7.9 per cent, reaching around 134.5 million square metres, while overall revenue is expected to record a 10.8 per cent CAGR and reach Rs 5,936 crore.

Following the quarterly performance, the broker increased its FY27E revenue, EBITDA, PAT and EPS estimates by 3.4 per cent, 7.5 per cent, 7.5 per cent and 7.5 per cent, respectively. FY28E revenue, EBITDA, PAT and EPS estimates were raised by 3.1 per cent, 6.0 per cent, 6.5 per cent and 6.5 per cent, respectively.

The broker conservatively models EBITDA margins of 17.8 per cent in FY27E and 17.5 per cent in FY28E, reflecting the potential for higher sales and marketing expenditure as volumes rise.

Key Risks

• Gas-price volatility could affect production costs and margins.
• Delays in completing planned new capacities could affect the expected volume and margin benefits.