Kajaria, Somany top stock picks in tiles sector as Nirmal Bang expects 12-13% growth

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Kajaria Ceramics and Somany Ceramics - with a buy call. Somany Ceramics share price has gained about 24 per cent while Kajaria Ceramics share price has risen about 13 per cent in the last one year.

The brokerage firm pointed out that the sector's growth prospects are bright in India. It believes India’s ceramic tiles market offers enormous growth opportunities for sustained development over the medium term (two times the global industry growth rate), propelled by the government's push for bolstering domestic production and inherent demand from associated sectors.

In the housing sector, tiles make up between 2- 4 per cent of the construction costs. It highlighted that India is the second largest producer and consumer of tiles in the world after China, with annual consumption quantum pegged at about 2,069msm as of the calendar year 2021, accounting for nearly 14 per cent of the global production and about 11 per cent of the global consumption.

"Yet, it has the lowest per capita consumption of tiles at nearly 0.6sqm versus the global average of 1.4sqm, indicating significant room for growth going ahead," Nirmal Bang observed. "The market size for ceramic tiles in India is estimated at ₹59,500 crore for 2023 and the same is anticipated to reach ₹70,700 crore by 2025-end, implying a CAGR of 13.6 per cent during the years 2023-2025.

Of this, 30 per cent is exported at about ₹17,900 crore, which is expected to almost double by 2025-end to nearly ₹30,400 crore," Nirmal Bang pointed out. Moreover, the tiles industry is dominated by the unorganised sector (60 per cent share), although 14 organised players (40 per cent) have gained market share by offering high-quality products at competitive rates, said the brokerage firm.