Kajaria Ceramics: Capacity expansion change growth curve

# Kajaria Ceramics: Capacity expansion could change the growth curve Kajaria Ceramics Limited is expanding its tile capacity at Gailpur and Srikalahasti. The two projects can take its own manufacturing capacity from about 82.7 million sq. metres to roughly 104–105 million by mid-2027. **What is changing:** The Gailpur expansion will cost about ₹170–175 crore and add around 11 million sq. metres. Srikalahasti will require about ₹210 crore and add another 10–11 million sq. metres. Both projects are being funded through internal accruals. The interesting part is the product mix. The new lines will largely manufacture 60×120 cm tiles, one of India's most popular tile sizes. Management expects the new lines to produce around 35,000–37,000 metres per day versus 15,000–17,000 metres from older lines, creating a potential cost advantage. Kajaria's FY26 EBITDA margin improved from 12.76% to 17.84%, supported by cost reduction, sales-structure changes and better product mix. **My view:** The expansion is interesting because it combines additional capacity with potentially better manufacturing economics. The key is utilisation. If Kajaria fills the new capacity while maintaining its product mix and margins, incremental revenue could translate into stronger operating leverage. The risk is that the domestic tile industry remains competitive, particularly from unorganised players. Higher capacity only creates value if demand absorbs it without forcing excessive discounting. **What I'm watching:** capacity utilisation, realisations per sq. metre, 60×120 cm volumes, EBITDA margin and cash generation. **Stance:** The key test for Kajaria is whether new capacity produces higher returns rather than simply increasing production. **Disclosure:** I am a SEBI Registered Research Analyst. Please refer to the applicable disclosures before taking any investment decision.