KAJARIACER

Eyes Recovery with Price Hikes

, India’s largest tile maker, expects 7–8% YoY volume growth in Q4FY26, aided by normalization of operations and production disruptions in Morbi, Gujarat. After a weak Q3 marked by dealer churn and destocking, the company is leveraging its premium positioning, price hikes, and industry-wide discount withdrawal to sustain margins and gain market share. Near-Term Drivers - Q3FY26 saw muted demand due to sales unification process and dealer churn. - Morbi shutdown (~25 days till mid-April) created supply gaps, enabling Kajaria to capture share. - Dealer inventory remains low (~15 days), supporting near-term demand. - Own plants unaffected by gas supply issues; however, 40% subsidiary capacity in Morbi faces volatility due to Gujarat Gas disruptions. Pricing & Margins - Price hikes: ~5% initially, followed by 7–8% in March, full impact from April. - Industry-wide discount withdrawal expected to revive realizations. - Operating margin: 17.4% in 9MFY26, above 10-year average of 16.3%. - FY26 margin guidance: 17–18%, supported by pricing actions and cost efficiencies. - Premium brand positioning and favorable product mix provide competitive edge. Industry Context - Morbi accounts for 70–75% of India’s ceramic tile output. - Industry remains fragmented and largely unorganized, with export-focused smaller players intensifying domestic competition during global slowdowns. - Gas price volatility remains a key monitorable for the sector. Valuation & Stock Performance - Stock down 5.15% YTD 2026, outperforming Nifty 500 (–14%) and peer Somany Ceramics (–11%). - Trades at 27x FY27E P/E (Bloomberg consensus). - Volume growth visibility limited in near term, as incremental sales depend on outsourced capacity due to high utilization at own and JV plants.