Kajaria Ceramics Limited Q1 FY27 Earnings Call Summary

Event Participants

Executives

4 Ashok Kajaria (Chairman), Chetan Kajaria (Vice Chairman), Rishi Kajaria (Managing Director), Sanjeev Agarwal (CFO)

Analysts

11 Anubhav (Cosma Ventures), Anu Parekh (Anand Rathi Investments), Ashish (Motilal Oswal), Dhananjay (Centurion Broking), Disha (Trinetra Asset Managers), Keshav Lahoti (HDFC Securities), Pankaj (ICICI Asset Manager), Praveen (PL Capital), Ritesh (Investec India), Sagar (Marine Research), Sneha (Nuvama)

Financials & KPIs

Geographic & Segment Commentary

• Tiles: Revenue of ₹1,162 crores grew 18% YoY with only 6% volume growth, reflecting fuel-linked price pass-through. The price differential between Kajaria (branded) and Morbi products narrowed from ~40% to ~20%, driving a decisive shift of "fence-sitter" consumers toward branded products. Strategy combines strengthening the ~1,800-dealer network (450 exclusive; +100 dealers planned, 50 exclusive) with aggressive project sales; the company recently won the lion's share of business from two of India's largest builders.
• Bathware (Kerovit): Revenue of ₹122 crores grew 33% YoY; FY27 target is 35-40% value growth. FY27 is a deliberate restructuring year — new Chief Business Officer hired in April, several areas being corrected — so margins will remain "tough," with improvement expected in FY28. Board approved acquiring the remaining 15% stake from Aravali Investment Holdings, signalling long-term commitment to building a market-leading bathroom solutions brand.
• Adhesives: Revenue of ₹45 crores grew 80% YoY (vs ₹25 crores). As the price differential between national branded players and informal competitors narrows, consumer preference is expected to shift decisively to branded products — a secular tailwind for the business.
• Geographic Mix: North 35%, South 30%, East 20%, West 15%; segment-wise, Metro 15%, Tier 1 ~30%, Tier 2 ~30%, Tier 3 ~15%. Growth is broad-based across India; company is opening dealer showrooms in remote locations (e.g., Maharashtra) and operates ~24-25 experience centres, adding 1-2 per year.

Company-Specific & Strategic Commentary

• Organisational Unification: In April 2025, three separate verticals (ceramic, polished vitrified, glazed vitrified) were merged into one tiles vertical, creating a leaner organisation with significant cost reductions; real volume growth emerged in Q4 FY26 (+~11%), forming the base for FY27 confidence.
• Brownfield Capacity Expansion: Two new-generation expansions announced — Srikalahasti, South (10 million sqm, ₹210 crores, announced earlier) and Gailpur/Jodhpur, Rajasthan (11 million sqm, ₹165 crores, announced this quarter); total FY27 CapEx ~₹400 crores, new capacity onstream by Q1 FY28. New technology delivers 22 million sqm for ₹370 crores versus ~5 million sqm at ₹150 crores two years ago, with 340-metre kilns (vs 200-metre earlier) — both CapEx- and OpEx-efficient, expected to be highly ROCE accretive.
• Project Sales Lever: Historically under-penetrated institutional segment is now a key growth driver alongside retail; breakthrough wins with two of India's largest builders provide a structural volume uplift.
• Kerovit Minority Buyout: Acquiring the remaining 15% stake from Aravali Investment Holdings signals long-term commitment to building a market-leading bathroom solutions brand.
• Branded Preference Shift: Gas-driven price increases in Morbi (spot ~₹85/SCM) have compressed the branded-vs-Morbi price gap from ~40% to ~20%; consumers building homes once in 5-20 years are increasingly choosing branded products — a demand tailwind for Kajaria's multi-location plant strategy.
• Promoter Remuneration: Promoters have confirmed they will not take salary for FY2027.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Volume Growth Guidance

• Question: After a long period without guidance, where does the double-digit volume growth confidence come from, and is July tracking similarly? (Keshav Lahoti, HDFC Securities)
• Answer: April was soft, but May, June and July all saw good volume growth. Two levers: strengthening the complete distribution network and newly aggressive project sales — Kajaria just achieved major breakthroughs with two of India's biggest builders, capturing the lion's share. With these, "we feel that we are bound to do a double-digit growth this year." (Rishi Kajaria)

April Demand Softness

• Question: Was April weakness region-specific or broader, and what caused it? (Sneha, Nuvama)
• Answer: Three factors: (1) Morbi was fully shut from 5 March to 15 April, with only ~10% of plants restarted by mid-April; (2) dealers pre-bought heavily in March ahead of April price increases; (3) nationwide labour shortage due to elections and LPG shortages. May-July demand has normalised and the domestic market outlook is "very optimistic." (Management)

Pricing, Fuel Costs & Realisation

• Question: Can you quantify segment-wise price hikes and sustainability going forward? (Praveen, PL Capital)

• Answer: Morbi gas prices rose from ~₹48 to ₹86-88 per SCM (vs ~10-12% increase in north), forcing Morbi manufacturers to raise prices ~40-45%. Kajaria's own north/south plants raised prices 10-11%, narrowing the gap sharply. Gas remains volatile with the war; the multi-locational plant footprint is a current competitive advantage. (Management)

• Question: Can you quantify Q1 gas cost per SCM by region and on spot basis? (Ritesh, Investec India)

• Answer: Average fuel cost ~₹71/SCM in Q1; Morbi (west) ~₹85, north ~₹64, south ~₹72-73; spot ~₹85. Gas is a combination of sources (GAIL, GSPC, CGDs) and prices are determined by Ministry of Petroleum parameters tied to the war — even GAIL cannot predict tomorrow's pricing. (Management)

Capex Rationale & Technology

• Question: Why the renewed interest in owned-plant CapEx, and what is the margin differential vs Morbi outsourcing? (Sneha, Nuvama)

• Answer: New-generation technology is far more capital- and operating-cost-efficient: 11 million sqm at ₹165 crores vs 5 million sqm at ₹150 crores two years ago. The new plants will be "highly ROCE accretive" with better margins than existing facilities; Gailpur specifically serves strong north/east demand following the gas-driven price shift. (Chetan Kajaria)

• Question: Why is CapEx intensity different between the two plants, and what technology will be deployed? (Ritesh, Investec India)

• Answer: The plants themselves are identical; Srikalahasti needs a brand-new shed (₹80-90 crores of the ₹210 crores) while Gailpur extends an existing shed (₹40-50 crores). Technology priority is capacity/scale — 340-metre kilns versus 200-metre earlier, with a mix of Sacmi and Chinese equipment providing size flexibility. (Management)

Competitive Dynamics — Branded vs Morbi

• Question: With the branded-Morbi price gap narrowing, is outsourcing still lucrative, and is a structural shift from unorganised to organised underway? (Anu Parekh, Anand Rathi; Pankaj, ICICI AMC)
• Answer: This year there is no choice — production constraints require Morbi outsourcing; from Q1 FY28, 22 million sqm of in-house capacity will drastically reduce that dependence. Morbi remains dependent on single-supplier GSPC spot imports and faces high uncertainty, while Kajaria's GAIL/CGD sourcing offers relative certainty. It is "too early to say" if Morbi becomes more organised, but near-term dynamics favour branded multi-locational players. (Management)

Medium-Term Growth & Organisation

• Question: After three years of low growth, what gives confidence in the next three years, and is a ₹6,000 crore top-line goal realistic? (Pankaj, ICICI AMC)
• Answer: The April 2025 unification of three tile verticals into one made the organisation leaner and volume growth returned in Q4 FY26 (~11%). The May–July demand trajectory, narrowing branded/unbranded price gap, and new projects lever support "very positive" next three years; the two large expansions are timed to capture this demand. On slabs, management acknowledged Kajaria "missed out" earlier and the new capacities specifically address bigger-size/slab demand. (Ashok Kajaria / Management)

Bathware (Kerovit) Strategy

• Question: What is the volume-price split in bathware's 33% growth, and the margin outlook? (Anubhav, Cosma Ventures)
• Answer: ~15-16% of the growth came from price increases, the rest from volume; FY27 target is 35-40% value growth. Kerovit is in a restructuring year — new CBO joined in April, several areas being corrected — so margins will be "tough" in FY27, with meaningful improvement expected in FY28. No bathware-specific margin guidance; blended company EBITDA margin guided at 18-19%. (Management)

Exports & Distribution

• Question: What is the status of Morbi exports on a monthly basis? (Dhananjay, Centurion Broking)
• Answer: Gulf War disruption and 1.5-2x freight hikes have cut Morbi exports to a ~₹1,000 crores/month run-rate vs ₹16,000 crores in FY26. Kajaria's exports are <1% of revenue — the company is fully focused on the domestic market, which is "growing everywhere." Distribution/geographic mix: North 35%, South 30%, East 20%, West 15%; Metro 15%, Tier 1 ~30%, Tier 2 ~30%, Tier 3 ~15%. (Management / Rishi Kajaria)

Key Takeaway

Kajaria delivered a strong Q1 FY27 — consolidated revenue grew 20% YoY to ₹1,328 crores, EBITDA margin expanded 288 bps to 19.60% (₹260 crores implied), and PAT rose 55% to ₹169 crores — despite a soft April, with volume up 6% and realisation up ~11% on fuel-linked price hikes. Strategic momentum centres on the April 2025 organisational unification, aggressive project wins (lion's share from two of India's largest builders), and two brownfield expansions (Srikalahasti 10m sqm/₹210 crores; Gailpur 11m sqm/₹165 crores) using next-generation 340-metre kilns that roughly halve capital intensity. Management guided to double-digit volume growth over the next nine months (130 million sqm for FY27), ~20%+ revenue growth, ₹1,000+ crores operating EBITDA at 18-19% margins, and ~40% outsourcing dependency this year before 22m sqm of in-house capacity comes online in Q1 FY28. Kerovit (₹122 crores, +33%) restructures for a FY28 profit inflection, while the narrowed branded-vs-Morbi price gap (from ~40% to ~20%) supports structural share gains; key watch items remain volatile gas prices tied to Middle East geopolitics, FY27 Morbi outsourcing reliance, and execution of the two new plants.

Note: Transcript incomplete — exact call date/time not specified; "VAT" in transcript interpreted as Profit After Tax (₹169 crores).