Kajaria Ceramics Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rahul Agarwal - Ikigai Asset Manager Holdings Pvt. Ltd. - Analyst : Sir, firstly, just a view on gas pricing. Broadly, what we are understanding is LNG is going to be oversupplied globally. It looks like long term, the gas pricing is going to be extremely low. This is a more longer-term view, I think '26, '27 we're going to see a big time correction in gas pricing. Any thoughts internally would have thought that -- how do you see tile business long term, would that really happens in India?

Question: Rahul Agarwal - Ikigai Asset Manager Holdings Pvt. Ltd. - Analyst : I understand, right, sir. What I was asking was basically global studies are saying that LNG pricing could correct like 40% going into next three years. Any major change would you see, let's say, hypothetically, if that happens, what will happen... REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 11:30AM, KAJR.NS - Q2 2025 Kajaria Ceramics Ltd Earnings Call

Question: Rahul Agarwal - Ikigai Asset Manager Holdings Pvt. Ltd. - Analyst : Okay. Got it, sir. Sir, secondly, just on the industry performance, overall first half and outlook, what do you think like how will this really pan out? Obviously, we all know that real estate launches have been a bit slower, but ultimately outlook is okay. Any thoughts on what should be the first sign of recovery in demand?

Question: Rahul Agarwal - Ikigai Asset Manager Holdings Pvt. Ltd. - Analyst : Got it, sir. And last question on the working capital, is 59 days. Sir, can we as a business do better than this in terms of is it really possible to run the business at 30 days because what we're seeing is so much actually trying to run it at almost zero investment. Is it really sustainable?

Question: Rahul Agarwal - Ikigai Asset Manager Holdings Pvt. Ltd. - Analyst : And how will that come through this.

Question: Rahul Agarwal - Ikigai Asset Manager Holdings Pvt. Ltd. - Analyst : Got it, sir. Will that come more from receivables or inventory management?

Question: Shaleen Kumar - UBS Investment Bank - Analyst : Sir, you said that second half is likely to be much better than the first half. Is there any signs or any discussions with your distributor indicating that -- like.

Question: Shaleen Kumar - UBS Investment Bank - Analyst : Right, sir. Sir, I just want to understand if you have any sense, we have delivered like 8% growth volume growth. Any sense that we've grown ahead of the industry? Like how much was the industry just like in case you have any intel on that?

Question: Shaleen Kumar - UBS Investment Bank - Analyst : Yes, yes. Sir, our realization has been flat. I understand it's a tough environment. But how should we think about like it's a volume versus value play. So going forward, is there a chance for our realization to improve and what will drive it if that could be a case?

Question: Shaleen Kumar - UBS Investment Bank - Analyst : But that's not something we are looking in near term, right? It's more of a little -- few quarters away. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 11:30AM, KAJR.NS - Q2 2025 Kajaria Ceramics Ltd Earnings Call

Question: Shaleen Kumar - UBS Investment Bank - Analyst : Actually, that's kind of answered my other question where I could see increase in other expense. So is that the reason for jump in other expense?

Question: Shaleen Kumar - UBS Investment Bank - Analyst : And sir, last bit -- okay, the expense I understand now. Like how should we think about our gross margin does have also come down a bit, right? So is there any particular input costs that have gone up.

Question: Shaleen Kumar - UBS Investment Bank - Analyst : The sequential -- so it's largely because of outsourcing. Understood. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 11:30AM, KAJR.NS - Q2 2025 Kajaria Ceramics Ltd Earnings Call

Question: Keshav Lahoti - HDFC Securities Limited - Analyst : Sir, as you -- Nepal planted Commission now give us some sense on how the Nepal market is doing, what sort of ramp up your planning, what sort of margins you would make in this market?

Question: Keshav Lahoti - HDFC Securities Limited - Analyst : So should we expect like what sort of ramp up like 50% utilization in next one year? And how would be the margin in this plant compared to your Indian business?

Question: Keshav Lahoti - HDFC Securities Limited - Analyst : So this is a margin accretive, like Nepal is a margin-accretive business compared to tile business?

Question: Keshav Lahoti - HDFC Securities Limited - Analyst : Understood. Got it. Sir, secondly, coming on the sanitary ware business. So again, sort of a subpart performance of rev revenue growth in Sanitaryware and plywood business have declined by 26%. So -- how should we see this business going forward?

Question: Keshav Lahoti - HDFC Securities Limited - Analyst : Last question from my side. The volume growth guidance for the year that you give last year, 11% to 12% for FY '25 with 15% to 17% EBITDA margin. Does it remain intact? Or would you like to lower it?

Question: Keshav Lahoti - HDFC Securities Limited - Analyst : Okay. So what is the new guidance for this year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 11:30AM, KAJR.NS - Q2 2025 Kajaria Ceramics Ltd Earnings Call

Question: Keshav Lahoti - HDFC Securities Limited - Analyst : Sir, what's the new guidance for this year for volume growth and margin ?

Question: Keshav Lahoti - HDFC Securities Limited - Analyst : Okay. So by Q4, it could be 15%, right?

Question: Keshav Lahoti - HDFC Securities Limited - Analyst : For Q4, you're talking or as a year you're talking?

Question: Jyoti Gupta - Nirmal Bang Securities Pvt. - Analyst : This is related to the same volume growth number that is given that full year, it will be in the range of high single digit, 9% to 10%. Could you give us any guidance in terms of the pipeline because we know that the project which would require us -- the order for those tiles would have any which would have come. So pipeline -- so do you have your pipeline...

Question: Jyoti Gupta - Nirmal Bang Securities Pvt. - Analyst : I agree, sir. But you will have a breakup of your tile volumes in terms of IHB and the real estate or segment and real estate would typically have a pipeline. So maybe.

Question: Ritesh Shah - Investec Bank PLC - Analyst : A couple of questions. Sir, first is, in the last analyst meet, you had indicated that we will focus on government projects and we'll have a plan in your team. You have also indicated certain target numbers from this particular segment. Any specific update over here? And what will be the contribution of government projects if you could please help on that?

Question: Ritesh Shah - Investec Bank PLC - Analyst : That's useful. And sir, would it be possible for you to quantify what percentage of our total volumes are from government projects right now and where we aspire this number to be?

Question: Ritesh Shah - Investec Bank PLC - Analyst : Sir, my second question is.

Question: Ritesh Shah - Investec Bank PLC - Analyst : Sure. That's helpful. Sir, my second question is on capital allocation. Just keeping a check of what the company is doing. I see basically there was a JV that we did I think it's in -- for UK. Parts Holding Limited, I think Kajaria UKP Limited. After that, we have made an acquisition of CTD stores where the quantum is quite, quite significant. So is it like change in thought process? Are we investing into the retail network overseas? How should we look into this? And the total amount that we have actually spent on the overseas assets, if at all, we have acquired them if what I read is correct.

Question: Ritesh Shah - Investec Bank PLC - Analyst : So is my number right, GBP 400,000 to acquire 7 stores? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 11:30AM, KAJR.NS - Q2 2025 Kajaria Ceramics Ltd Earnings Call

Question: Ritesh Shah - Investec Bank PLC - Analyst : Okay. And from an incremental ROC standpoint, if I have to look at this particular aspect in isolation, I think Kajaria has always been focused on incremental ROC and margins. So how does this particular bucket on overall scheme of things actually pertain because it's a bit different to traditionally how we have operated.

Question: Ritesh Shah - Investec Bank PLC - Analyst : Fair thing. But we don't intend to progress this -- on this path going forward, right? Or is it like if we have some distressed assets, we'll continue to buy.

Question: Ritesh Shah - Investec Bank PLC - Analyst : Sure. That's helpful. Sir, my third question is, I was moving around the channel. And I found basically two brands. One was Primera and other was Technica, the price points over here in the same Kajaria shop were significantly lower. I'm just trying to understand, is there some change in thought process on our market positioning because Kajaria has always been a premium solid brand. That's how our pricing has been.

Question: Ritesh Shah - Investec Bank PLC - Analyst : Okay. So is this something for a specific micro market in Kerala or is that we intend to replicate on a pan-India basis?

Question: Ritesh Shah - Investec Bank PLC - Analyst : Okay. That was quite helpful. And sir, last question. Yes. Yes. Sorry, sorry, please finish sorry.

Question: Ritesh Shah - Investec Bank PLC - Analyst : Okay. And sir, would it be possible for you to quantify the quantum of volumes attached to this? Or is it very, very small?

Question: Ritesh Shah - Investec Bank PLC - Analyst : Okay. Last question, sir, channel inventory, is it low, high? How should we gauge?

Question: Praveen Sahay - Prabhudas Lilladher Pvt - Analyst : My first question related to the Bathware. As 5.7% of the growth for this quarter, how is the guidance for a full year or the year ahead?

Question: Praveen Sahay - Prabhudas Lilladher Pvt - Analyst : Good to hear, sir. Second question is related to the Nepal project Earlier, you had said -- you have already business there, and you do around 80,000 square meter per month. And with the plant coming in, will you ramp up to the 400,000 square meter per month. So that holds true. So from September or when the plant is commissioned. So October, November, we will start seeing such number improvement. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 11:30AM, KAJR.NS - Q2 2025 Kajaria Ceramics Ltd Earnings Call

Question: Praveen Sahay - Prabhudas Lilladher Pvt - Analyst : Okay. So currently, you are already doing 80,000 square meter per month from Nepal.

Question: Praveen Sahay - Prabhudas Lilladher Pvt - Analyst : Yes, sir. Secondly, on the last call also, you had given an indication of broadening the coverage of channel facing among dealers. Can you quantify in these numbers like how much of 1,800-odd dealers so far covered with the channel financing. And how is our future target.

Question: Praveen Sahay - Prabhudas Lilladher Pvt - Analyst : Sir, on this only, is that the Kajaria only doing in the market this kind of a channel financing to the deal jets are also doing.

Question: Praveen Sahay - Prabhudas Lilladher Pvt - Analyst : Okay. Fine, sir. And just to clarify, which you had answered earlier related to the government project. So for FY24, you had said 12% to 13% of your volume came from the government project and 15% for this year.

Question: Praveen Sahay - Prabhudas Lilladher Pvt - Analyst : That is -- sorry, that is for the volume you are saying?

Question: Praveen Sahay - Prabhudas Lilladher Pvt - Analyst : Okay. Last year, 10% volume this year, 12.5% of volume?

Question: Sonali Salgaonkar - Jefferies Group LLC - Analyst : My first question is regarding the Morbi exports. You did mention that there is a 15% fall in H1. So I wanted to check on two aspects. Firstly, was there a planned shutdown in August, September by Morbi? And secondly, is the dip in exports in facing any domestic operations in terms of pricing because of the higher influx of their supply in the domestic market?

Question: Sonali Salgaonkar - Jefferies Group LLC - Analyst : Sir, very clear. Sir, my second question is regarding pricing. Between April '24 to September, what has been the overall pricing action in H1 FY25, both for tiles and Sanitaryware.

Question: Sonali Salgaonkar - Jefferies Group LLC - Analyst : Sure. So that's good to hear because.

Question: Sonali Salgaonkar - Jefferies Group LLC - Analyst : Understood. Sir, last question. CapEx guidance for FY25.

Question: Sonali Salgaonkar - Jefferies Group LLC - Analyst : This is including the normal CapEx. Unidentified Company Representative Yes, including the maintenance cap.

Question: Onkar Ghugardare - Shree Investments - Analyst : I just wanted to check with this lower revenue growth than earlier projected. Is there any impact on your long-term goals which you had earlier stated 3-year goal?

Question: Onkar Ghugardare - Shree Investments - Analyst : Yes, I was asking whether with the lower growth in the revenue because of the industry performance in an industry, I just wanted to know whether there will be an impact on your guidance, which we had earlier given 3-year goal.

Question: Onkar Ghugardare - Shree Investments - Analyst : So I guess for the 3-year goal you had stated around 13% to 15% kind of revenue growth, if I'm not mistaken.

Question: Onkar Ghugardare - Shree Investments - Analyst : And what was the margin guidance given for three years?

Question: Onkar Ghugardare - Shree Investments - Analyst : And what about the revenue projects which are given. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 11:30AM, KAJR.NS - Q2 2025 Kajaria Ceramics Ltd Earnings Call

Question: Onkar Ghugardare - Shree Investments - Analyst : Okay. As far as the current quarter is concerned, have you seen any green shoots since you are seeing the second quarter -- second half will be better than first half.

Question: Madhav Marda - Fidelity Investments - Analyst : (spoken in Hindi language) It is not something that we at Amazon. We don't have an Amazon sale. It's a normal thing, normal sale.

Question: Rahul Agarwal - Ikigai Asset Manager Holdings Pvt. Ltd. - Analyst : Sir, just one question on Keronite. How is the product rollout, which happened starting a-how is the acceptance from the dealer? Is it like the product is very different than what the range we wish to supply in GVT, some color on that, please.

Question: Rahul Agarwal - Ikigai Asset Manager Holdings Pvt. Ltd. - Analyst : Sir, could you just explain how is that different from Kajaria as of now?

Question: Rahul Agarwal - Ikigai Asset Manager Holdings Pvt. Ltd. - Analyst : Yes. Well, I'm assuming that this 38% utilization will obviously increase. And it's a 6 million square meter plant. It's not small, right?

Question: Rahul Agarwal - Ikigai Asset Manager Holdings Pvt. Ltd. - Analyst : Okay. So the 6 million will have Kajaria, Keronite both separately. That's what you're saying.