The Kajaria Ceramics shares fell 3.9% to an intra-day low of Rs 976 on the National Stock Exchange a day after the company disclosed that a financial fraud was conducted by Dilip Maliwal, Chief Financial Officer of Kerovit Global, a wholly-owned subsidiary of Kajaria Bathware and a step-down subsidiary of Kajaria Ceramics.
However, Motilal Oswal Financial Services retained its ‘Buy’ rating on Kajaria Ceramics. The brokerage has also maintained its target price of Rs 1,252 on the stock, which implies more than 19% upside over the next 12 months.
Here is a detailed analysis of Motilal Oswal’s investment rationale-
Motilal Oswal on Kajaria Ceramics: Provision of Rs 20 crore to be made
The company will be keeping aside Rs 20 crore as exceptional expenses. Also, the management said that 50% is recoverable. All other subsidiaries have been thoroughly reviewed, and no discrepancy has been found.
Further, the brokerage house outlined that “In line with soft demand and a healthy margin guidance,” they expect Kajaria Ceramics to post volume growth of 9% annually on an annualised basis and revenue growth of 10% between FY25-FY28.
Furthermore, Motilal Oswal projected 18% RoE, 25% RoCE, 36% RoIC, and an annual free cash flow of more than Rs 500 crore.
Motilal Oswal on Kajaria Ceramics: Other key challenges
However, currently there’s a soft demand scenario and intense competition from organised brands and Morbi-based players. The expectations are that sustaining EBITDA margins of more than 18% will be a tall task for Kajaria Ceramics.
Kajaria Ceramics stock performance
The share price of Kajaria Ceramics has fallen 9% in the last five trading sessions. The stock has declined 10% over the past one month and over 11% in the last six months. The share price of Kajaria has erased 13% of investors’ wealth over the previous one year.