UBS has initiated overage on Kajaria Ceramics with a BUY Rating and the Following Note
Our positive thesis on Kajaria was premised on it delivering secular growth driving gradual rerating of the stock, similar to what we have seen in many segments over last few years (paints, appliances, batteries, durables etc.). Kajaria’s continued delivery of profitable growth over last few quarters despite tough macro environment supports this. The stock is up 77% over last 6 months as it rerated from 11.5 to 17.8 1-y forward PE (appliances/paints companies trading at 16-34 PE). We expect this rerating to at least sustain as we remain confident on company’s ability to deliver ahead.
We roll over our valuation to FY16 and now value the stock at 20xFY16E EPS. Maintain Buy rating with a revised target price of Rs530.
