Kajaria Ceramics

Kajaria Ceramics reported a consolidated revenue of INR1,186 crores in Q2 FY26, marking a marginal 1% year-over-year growth, primarily due to low tile volume growth and the closure of the absence supply sales division. Despite the soft market conditions, the company achieved a strong operating margin, with EBITDA improving to 17.94%, a significant increase of 122 basis points sequentially and 447 basis points year-over-year. Net Profit After Tax (PAT) saw a robust 58% growth, reaching INR133 crores compared to INR84 crores in the corresponding period last year.

The company's focus on cost optimization has yielded substantial results, contributing significantly to the improved margins. Management highlighted reengineering packing boxes across plants, leading to annual savings of INR30-35 crores. Further savings are expected to accrue quarter-by-quarter across raw materials, finished goods purchases, salaries, and administrative overheads. The current margin of 17.94% is considered sustainable and superior to past peaks, which were often driven by one-off^📎 commodity price falls.

Kajaria is undergoing a strategic transformation, dubbed 'Kajaria 2.0,' aimed at building a leaner, more agile, and growth-ready organization. This includes the unification of sales operations, which previously had three independent divisions. While this process caused some short-term adjustments and potential sales loss, it is expected to result in higher efficiency, operational consistency, and a stronger market presence. The company has also appointed a management consultant to guide market share expansion and is strengthening its team for architects and influencers.

Management acknowledged that the market remained soft during the first two quarters of FY26, with flat tile segment revenue at INR1,051 crores. However, they expressed optimism for a demand revival in the second half of FY26, particularly from Q3 onwards, citing expected market improvements, the benefits of their unification strategy, and consultant-led initiatives. They anticipate 'some volume growth' in the October-December quarter and 'good volume growth' in H2 FY26, driven by construction activity picking up after regional floods.

Beyond tiles, the Bathware segment demonstrated strong performance, growing 14% year-over-year to INR102 crores in Q2 FY26. The Adhesives segment also showed significant growth, reaching INR32 crores compared to INR18 crores in Q2 FY25. The company's strategy involves working on all fronts—dealer network, project network, and new segments like architects and government projects—to drive overall volume growth.

Kajaria is actively working to enhance its distribution network and market penetration. This includes mapping the country state-by-state to identify non-performing dealers and white spaces, strengthening the distribution network, and increasing exclusive showrooms from the current 450 with 1,850 dealers. The unification of sales also involves standardizing pricing and discount structures to simplify operations for dealers and improve cross-selling across the entire Kajaria product range.

The Nepal operations, a 5 million capacity joint venture, sold approximately 0.7 million square meters in Q2 FY26. Management noted ongoing 'turmoil' in the country and stated that the primary focus for this new market is currently on liquidating inventory and establishing the plant and dealer base, rather than immediate profit generation. They aim to sell the capacity as they continue to develop the market.