Kajaria Ceramics Limited — Q1 FY26 earnings call

Call held 22 Jul 2025

Management summary

Kajaria Ceramics reported a muted Q1 FY26 with consolidated revenue declining 1% YoY to INR 1,104 crores, primarily due to soft market demand and the closure of the plywood division. Despite this, the company significantly improved its EBITDA margin to 16.72% from 15% YoY, driven by aggressive cost optimization measures and the strategic unification of its tile divisions. Management expressed confidence in future volume growth and market share gains through these internal efficiencies, while remaining cautious about the broader domestic market demand.

Highlights

  • Consolidated revenue stood at INR 1,104 crores, indicating a 1% year-on-year decline.

  • EBITDA margin improved to 16.72% in Q1 FY26, up from 15% in Q1 FY25.

  • The plywood division has been shut down, with all related expenses squared off in the previous year.

  • The Adhesives segment is targeting a turnover of INR 120 crores+ for FY26, up from INR 75 crores last year, with a current EBITDA margin of 17%.

  • The Bathware division is targeted to achieve INR 480 crores turnover in FY26 (from INR 400 crores last year) and is expected to be profitable this year, reporting INR 4.5 crores EBIT in Q1 FY26.

  • Promoters have forgone their salaries for FY26 until the company achieves an EBITDA run rate of INR 1,000 crores (INR 250 crores per quarter).

  • Other expenses for Q1 FY26 were INR 113 crores, with a sustainable run rate targeted at INR 110-120 crores.

  • Capex for FY26 is projected to be INR 100-150 crores, with no new capacity additions planned.

Key financials

  1. Consolidated Revenue ₹1,104 Cr -1%YoY
  2. EBITDA Margin 16.7%
  3. Bathware EBIT ₹4.5 Cr
  4. Other Expenses ₹113 Cr
  5. Average Fuel Cost ₹37
  6. Nepal Sales Volume 0.61 Mn

What they filed

Q1 FY27: revenue up 20.4%, net profit up 55.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,179 1,156 1,222 1,103 1,186 +1%1,168 +1%1,373 +12%1,328 +20%
EBITDA156 152 138 187 213 +37%200 +32%263 +91%260 +39%
Net profit86 79 43 110 134 +56%86 +9%157 +265%171 +55%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Turnover (FY25)
₹475 Cr Total
  • Bathware ₹400 Cr 84.2%
  • Adhesives ₹75 Cr 15.8%

Guidance & targets

Revenue

  • Adhesives Turnover Revenue · FY26 · High confidence INR 120 crores+
    Last year, our turnover was INR75 crores. And as the MD said in the beginning of the call, we're looking at INR120 crores plus this financial year.

    — Chetan Kajaria

  • Bathware Turnover Revenue · FY26 · High confidence INR 480 crores
    This Bathware division, which did last year about INR400 crores, we are looking at about INR480 crores.

    — Ashok Kajaria

Profitability

  • Bathware Profitability Profitability · FY26 · High confidence profitable
    And last year, Bathware lost some money. This year, it will definitely be profitable.

    — Ashok Kajaria

  • Promoter Salary Forgo Condition Profitability · ongoing · High confidence INR 1,000 crores EBITDA run rate (INR 250 crores per quarter)
    till we have a 4-digit EBITDA figure -- running figure of EBITDA, we will forgo our salary. Run rate of 4-digit EBITDA, we'll forgo that part of the salary.

    — Ashok Kajaria, Sanjeev Agarwal

Operating Expenses

  • Other Expenses Run Rate Operating Expenses · ongoing · Medium confidence INR 110-120 crores
    So it's okay. We can say around -- between INR110 crores to INR120 crores run rate you can consider.

    — Sanjeev Agarwal

Exports

  • Exports Value Exports · FY26 · Medium confidence INR 18,000 crores to INR 20,000 crores
    And going forward, it seems that the exports will definitely be between INR18,000 crores to INR20,000 crores.

    — Ashok Kajaria

Government Orders

  • Percentage of Sales from Government Orders Government Orders · FY26 · Medium confidence 10%

    Previously 4-6% → 10%

    Kajaria ji, you had indicated in the last call that we had our focus on government orders, that number will actually increase from 4% to around 10% in FY '26.

    — Ashok Kajaria

Capex

  • Total Capex Capex · FY26 · High confidence INR 100-150 crores
    This year capex would be around INR100 crores, INR150 crores.

    — Sanjeev Agarwal

Volume

  • Volume Growth from Unification Volume · going forward · Medium confidence positive growth
    You will definitely see a volume growth from here on. Exact numbers, we can't decide right now. I can only tell you that it will be a positive growth going forward.

    — Sanjeev Agarwal

Market Share

  • Market Share Gain from Unification Market Share · ongoing · Medium confidence better market share
    But one thing we have made clear that this strategy will be -- will help us to take market share subject to external conditions.

    — Sanjeev Agarwal

Risks & concerns

  • Muted domestic market demand

    medium

    Overall market demand continued to remain soft in Q1 FY26, with hopes for improvement after Q2 FY26.

    Management acknowledged

  • External factors affecting exports (e.g., geopolitical issues, freight rates)

    medium

    Exports were impacted by high freight rates and external circumstances like problems in Israel and Hamas, though things are expected to neutralize.

    Management acknowledged

  • Competitive pricing pressure and potential need for discounts to gain volume

    medium

    Management noted that selling prices may not go up, and they might need to offer discounts to gain market share, making margin commentary difficult.

    Management acknowledged

  • Sustainability of current margin levels given market dynamics and reinvestment needs

    medium

    Management found it difficult to commit to specific future margin percentages, citing the need to reinvest in the market to gain share and external factors.

    Analyst deflected

Areas of evasion (2)

  • Specific future margin percentage guidance
  • Precise market share improvement numbers

Q&A highlights

3 direct
Market outlook (domestic & export), cost optimization, and segment profitability (Plywood, Bathware) Direct
The domestic market is still muted, but I think things should be slightly better as we go forward for 2 reasons. One, the export, which was INR20,000 crores in '23-24 has come down to INR16,000 crores in '24-25... this year, exports for the first 3 months is about INR4,500 crores. And going forward, it seems that the exports will definitely be between INR18,000 crores to INR20,000 crores.

Provides a comprehensive overview of market conditions and the company's internal cost-saving efforts and segment targets.

Asked by Rahul Agarwal

Promoter salary forgo and its quantification Direct
I think it was a very bold decision on the part of the promoters to forgo the salary for this year... till we have a 4-digit EBITDA figure -- running figure of EBITDA, we will forgo our salary. Run rate of 4-digit EBITDA, we'll forgo that part of the salary.

Reveals a significant commitment from management towards cost cutting and aligning with shareholder interests, setting a clear internal target for profitability.

Asked by Shaleen Kumar

Rationale behind the unification strategy and its impact on store displays (SKUs) and inventory Direct
Ritesh, see, earlier, it was required to have different people selling those different tiles to the same dealer... the products have become so common that it was not making sense. So finally, after a lot of discussions... we took out that the way forward is that we have to unify and we have to optimize our resources.

Explains the strategic shift in distribution and marketing, addressing potential concerns about product visibility and efficiency, and clarifying the long-term benefits.

Asked by Ritesh Shah

3 min read 7 chapters

Detailed narrative

Q1 FY26 Performance Overview and Margin Expansion

Kajaria Ceramics reported a consolidated revenue of INR 1,104 crores for Q1 FY26, experiencing a 1% year-on-year decline. This was primarily attributed to a soft market demand and the cessation of the plywood division. Despite the revenue contraction, the company achieved a significant improvement in its EBITDA margin, which rose to 16.72% in Q1 FY26 from 15% in Q1 FY25, reflecting the initial positive impact of internal cost optimization measures.

Strategic Unification of Tile Divisions

The company is implementing a strategic integration of its three tile divisions (Ceramic Wall, Floor, and Vitrified Tiles) into a single unified structure. This move aims to enhance efficiency, scale volumes, and optimize resource deployment. Management noted positive initial feedback from this strategy, which is expected to enable the company to offer its entire tile range through a combined distribution network, ultimately leading to better market share and a leaner organization.

Aggressive Cost Optimization Initiatives

Kajaria Ceramics has initiated several aggressive cost-cutting measures. Promoters have committed to forgo their salaries for FY26 until the company achieves an EBITDA run rate of INR 1,000 crores (INR 250 crores per quarter). Other expenses in Q1 FY26 were INR 113 crores, a reduction from INR 140 crores in prior quarters, with a target sustainable run rate of INR 110-120 crores. These efforts also encompass optimizing advertising spend, renegotiating raw material prices, and staff optimization.

Market Outlook: Domestic Demand and Export Recovery

The domestic market demand remained soft in Q1 FY26, but management anticipates an improvement after Q2 FY26, driven by increased government infrastructure spending. Exports, which saw a decline from INR 20,000 crores in FY24 to INR 16,000 crores in FY25 due to external factors, are projected to recover to INR 18,000-20,000 crores in FY26. Additionally, the contribution from government orders is expected to rise from the current 4-6% to 10% of total sales in FY26.

Adhesives and Bathware Segment Growth Targets

The Adhesives division is targeted for significant growth, aiming for a turnover of over INR 120 crores in FY26, up from INR 75 crores last year, and currently boasts a 17% EBITDA margin. A new plant in Erode is slated to be operational within 3-4 months to strengthen its presence in southern markets. The Bathware division is also projected to grow its turnover to INR 480 crores in FY26 from INR 400 crores last year and is expected to turn profitable this fiscal year, having reported an EBIT of INR 4.5 crores in Q1 FY26.

Capital Allocation and Shareholder Returns

Kajaria Ceramics plans for a conservative capital expenditure of INR 100-150 crores for FY26, primarily for a new office and routine capex, with no new capacity additions. The company maintains a strong cash position of nearly INR 500 crores. Management indicated a willingness to consider increasing the dividend payout policy, subject to Board approval, rather than accumulating excess cash beyond a certain point, signaling a focus on shareholder returns.

Competitive Landscape and Pricing Strategy

Management noted that while some competitors from Morbi have announced price increases, these have not materialized on the ground. Kajaria's strategy prioritizes gaining market share through volume growth and internal cost optimization rather than relying on price hikes. They also expressed confidence in their brand strength and direct dealer network, stating that aggregators like Infra.Market have not significantly impacted their competitive position.

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