Demand continues to be positive from rural areas : Kajaria Ceramics

Update on the Indian Equity Market:
On Friday, NIFTY closed at 13,760 (-0.14%). Top gainers in NIFTY50 were Dr Reddy (+3.3%), Bajaj Auto (+2.5%), and Infy (+2.3%). The top losers were IndusInd BANK (-3.1%), HDFC Bank (-2.3%), and ONGC (-1.9%). The top sectoral gainers were IT (+1.6%), PHARMA (+1.3%), and FMCG (+0.3%) and the sectoral losers were PVT BANK (-0.7%), PSU BANK (-0.7%), and REALTY (-0.6%).

Excerpts of an interview with Mr. Ashok kajaria, CMD – Kajaria Ceramics and Sandip Somany, VC and MD of HSIL with CNBC TV18 dated 18th December 2020:
• The home improvement sector has seen a huge demand amid the COVID-19 lockdown and the work from home, including in the rural areas. The demand from non-metros and smaller towns is robust
• The residential market is very strong especially from tier-2, tier-3, and tier-4 towns. The demand is very strong after the lockdown.
• In the earlier months we thought it is pent up demand, but looking at the last five months, the demand continues to be positive.
• The branded players are doing much better post lockdown and exports too have gone up.
• After the lockdown, things are much better for branded players. They are doing very well in the domestic market. The exports have also gone up from the country in the last three months.
• September, October, and November, the exports have gone up by almost 40 percent than what it was last year.
• Mr Sandeep said that there has been significant growth in demand particularly in the kitchen space and they expect to see 15 percent growth by end of the year in that space.
• They see a very sharp increase in home improvement products. The kitchen space particularly has seen significant growth in demand because for the past 20-40 years nobody has spent so much time in their homes and people are enjoying cooking and rediscovering cooking.
• So, the kitchen space has become very exciting. They are the second-largest producer there in the country and they have seen a significant reemergence in the demand there. At the end of the year, we will be close to 15-20 percent positive.

Consensus Estimate: (Source: market screener and investing.com websites)
• The closing price of KAJARIACER was ₹ 700/- as of 18th December 2020. It traded at 49x/ 37x/ 31x the consensus earnings estimate of ₹ 14.4/ 19.1/ 22.7 for FY21E/FY22E/23E respectively.
• The closing price of HSIL was ₹ 105/- as of 18th December 2020. Consensus estimates for HSIL are not available.
• The consensus price target of KAJARIACER Ltd is ₹ 601/- which trades at 26x the earnings estimate for FY23E of ₹ 22.7/-
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