Kajaria Ceramics banks on better volume in second half of FY24
Kajaria Ceramics Ltd has had a dull run in the first half of FY24 with year-on-year volume growth at a subdued 7% amid weakness in demand. After the September quarter (Q2FY24) results, the management has toned down expectations, slashing volume guidance for the year to 9-10% from 13-15% earlier. Having said that, the second half of FY24 (H2FY24) would be comparatively better.
The company notes that volumes have picked up from September and there are expectations of demand picking up in H2 due to strong growth in the real estate sector that can ramp up volumes. For investors, Kajaria is a proxy for the housing and home furnishing space. “In real estate projects, demand for tiles usually arises towards the end of completion.
New capacities commissioning and higher ad-spends could also support volume growth," said a report by Jefferies India. The company has laid down expansion plans for the bathware segment. In August, Kajaria added capacity for glazed vitrified tiles in Sikandrabad, Uttar Pradesh.
In September, it expanded and modernized its ceramic tile capacity at Gailpur, Rajasthan. The ceramic tile manufacturer also plans to expand its distribution network in smaller towns to bolster volume growth. About 15-16% of Kajaria’s total revenue comes from metropolitan cities.
Tier 1 and 2 cities form 30% of sales each, while Tier 3 constitutes 22% and about 2% is from Tier 4 cities, the company said in the Q2 earnings call. Exports are another growth driver given India’s cost competitiveness that is helping it become a production hub for global exports. To primarily cater to exports, many new plants are coming up in Morbi, a key market.
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