Kajaria Ceramics Q1 FY27 earnings call

Kajaria Ceramics reported a robust Q1 FY27, with consolidated revenue growing 20% year-over-year to INR 1,328 crores. This growth was primarily attributed to an 11% increase in selling prices, influenced by rising fuel costs. Despite a soft April, volume growth for the quarter stood at 6%, with May, June, and July showing positive trends. The company's EBITDA margin expanded significantly to 19.60% from 16.72% in Q1 FY26, and PAT increased to INR 169 crores from INR 109 crores in the prior year.

The company is undertaking significant capacity expansion, with a brownfield project of 10 million square meters at Srikalahasti and a new 11 million square meters line at Gailpur, Rajasthan. These expansions, totaling approximately INR 400 crores in capex for FY27, leverage new, more efficient technology, including larger 340-meter kilns. Management emphasized that these new facilities are designed to be highly ROC accretive, offering lower production costs and better margins compared to older setups, and will help meet growing demand, particularly in the North and East.

A key market dynamic highlighted was the significant reduction in the price differential between Kajaria's products and those from Morbi, narrowing from 40% to below 20%. This shift, primarily due to drastic gas price increases in Morbi, has made Kajaria's branded products more competitive and is driving increased demand. Management noted that customers increasingly prefer branded tiles for their long-term value, contributing to Kajaria's sales growth and validating its market expansion efforts.

Kajaria Ceramics reiterated its commitment to being a 'domestic consumption story,' with exports accounting for less than 1% of its turnover. The company is bullish on the Indian market and is focusing its energy on strengthening its distribution and dealer network, including opening showrooms in remote areas. Additionally, Kajaria is aggressively pursuing institutional projects, a segment where it previously had less focus, to drive double-digit volume growth for the remainder of FY27.

The company's adjacencies, Kerovit (Bathware) and Adhesives, are growing into significant business pillars. The Bathware segment saw a 33% revenue growth in Q1 FY27 to INR 122 crores, and the decision to acquire the remaining 15% stake in Aravali Investment Holdings underscores a long-term commitment to the brand. The Adhesives business grew 80% to INR 45 crores, benefiting from a secular tailwind as consumer preference shifts towards branded products due to narrowing price differentials with informal counterparts.

Despite strong value growth expected for the Kerovit (Bathware) segment (35-40% for FY27), management indicated that FY27 would be a 'tough year' for its margins. This is due to ongoing internal corrections and restructuring efforts, including the recent hiring of a new Chief Business Officer in April. The company aims for better numbers in terms of both value and profits for Kerovit in the next financial year, suggesting a period of investment and realignment in the current year.

Kajaria improved its working capital cycle by 5 days, bringing it down to 46 days as of June 30, 2026, demonstrating a focus on operational efficiency. The company plans to add another 100 dealers this year, with 50 of them being exclusive, to further strengthen its market reach. This expansion, combined with a strategy to work closely with dealers on showroom design and product display, aims to enhance customer experience and drive sales.