Integrated Sales Efforts And Cost Optimization Will Unlock Potential

Key Takeaways

• Streamlined sales integration and sustained cost optimization are expected to drive margin expansion, operational efficiency, and higher profitability across core and new business categories.
  
• Diversification into adjacent segments and deepening presence in smaller urban markets aim to boost revenue growth and reduce dependency on core tile products.
  
• Weak demand, increased competition, and rising input costs threaten growth prospects, margin sustainability, and market share, prompting a focus on cost control over expansion or diversification.

Catalysts

Manufactures, sells, and distributes ceramic and vitrified wall and floor tiles under the Kajaria, GresBond, and Eternity brands in India and internationally.

• The unification of three separate tile divisions into a single integrated sales and distribution team is expected to streamline operations, reduce redundant expenses, and enable stronger market penetration through a combined dealer network. This is likely to support volume growth, operating leverage, and margin expansion going forward.
  
• Focused cost optimization measures-such as reductions in staff costs, more efficient advertising spend, lower packaging costs, and renegotiated supplier terms-are set to be sustainable and ongoing. These actions are already improving EBITDA margins and will further bolster net earnings as benefits continue to accrue in future quarters.
  
• Expansion and profitable scaling in adjacent categories like Bathware and Tile Adhesives are intended to diversify revenue streams and reduce reliance on core tiles. As these segments turn profitable and increase their top-line contribution, they offer potential for overall revenue growth and consolidated margin uplift over time.
  
• The management expects a revival in both domestic and export demand as external headwinds (e.g., high freight rates, subdued government spending, and geopolitical disruptions) normalize. Increased government investment in infrastructure and housing is anticipated, providing a strong long-term demand catalyst for tile consumption and, therefore, higher revenues.
  
• The company's intensified push into Tier 2 and Tier 3 urban markets-where middle-class housing and home improvement trends are robust-is being supported by targeted marketing, larger showrooms, and broader shelf space. This is positioned to tap into the ongoing urbanization and increasing consumer preference for branded, value-added products, supporting both topline growth and premium-margin product sales.

Kajaria Ceramics Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Kajaria Ceramics's revenue will grow by 10.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.7% today to 11.1% in 3 years time.
• Analysts expect earnings to reach ₹6.9 billion (and earnings per share of ₹39.21) by about September 2028, up from ₹3.6 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹5.4 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 43.7x on those 2028 earnings, down from 54.9x today. This future PE is greater than the current PE for the IN Building industry at 29.7x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.74%, as per the Simply Wall St company report.

Kajaria Ceramics Future Earnings Per Share Growth

Risks

• Domestic and export demand for tiles has remained muted over the last two years, with little evidence of a near-term recovery despite optimism, which could constrain revenue growth and limit earnings momentum.
  
• The company has discontinued its plywood division and is not planning any significant capacity expansion or inorganic growth, indicating limited new avenues for meaningful revenue growth and potential stagnation in market share.
  
• Kajaria is currently heavily focused on cost optimization and unification of sales/marketing teams, but management warns they may need to reinvest in market share via price discounts, which could pressure net margins and undermine recent EBITDA improvements.
  
• Competitive intensity remains high, especially with Morbi-based players expanding capacity and organized aggregators gaining scale; this could spark price wars and persistent realization pressure, ultimately affecting margin sustainability and overall earnings.
  
• Dependence on steady raw material and fuel costs-alongside an industry-wide requirement to absorb higher compliance (ESG, environmental, etc.) costs-means input cost inflation or tighter regulations could rapidly erode gross margin and earnings stability.

Valuation

• The analysts have a consensus price target of ₹1257.0 for Kajaria Ceramics based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹1600.0, and the most bearish reporting a price target of just ₹835.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹62.4 billion, earnings will come to ₹6.9 billion, and it would be trading on a PE ratio of 43.7x, assuming you use a discount rate of 14.7%.
• Given the current share price of ₹1235.45, the analyst price target of ₹1257.0 is 1.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.