Kajaria Ceramics Ltd Q3 2025 Earnings Call Transcript

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

Question: Keshav Lahoti - HDFC Securities Institutional Research - Analyst : Hi, thank you for the opportunity. Sir, it's very heartening to see Nepal hitting 70% utilization. Is it possible to give -- what was the Nepal sales in Q3? And is it a fair understanding Nepal sales are not clubbed in this quarter in total sales volume? From next quarter onwards, it will be clubbed as it will become a subsidiary? And initial color, how is the Nepal margin, and what are the ramp-up plans? How is the demand looking? That would be a lot helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 10:30AM, KAJR.NS - Q3 2025 Kajaria Ceramics Ltd Earnings Call

Question: Keshav Lahoti - HDFC Securities Institutional Research - Analyst : Okay. Understood. Sir, how has been the domestic sales since January month? Have you seen any pickup in market? And there were you talks about Morbi taking a shutdown. What is the progress on that, and what is your take on that?

Question: Keshav Lahoti - HDFC Securities Institutional Research - Analyst : Understood. One last question from my side. So Bathware, we are hoping to close this year with 15% growth. Still, this quarter also Bathware growth has been sort of muted. And PIy has seen a big degrowth in this quarter. So what is the outlook for both the segments?

Question: Keshav Lahoti - HDFC Securities Institutional Research - Analyst : Understood. Got it. Very helpful. Thank you.

Question: Jyoti Gupta - Nirmal Bang Securities Pvt. Ltd. - Analyst : Good evening, sir. Thank you for the opportunity. I'm lucky that my numbers are completely in line. Only thing is I know that Morbi has not gone in. They've been contemplating, but no such action has been taken so far. However --

Question: Jyoti Gupta - Nirmal Bang Securities Pvt. Ltd. - Analyst : Hello, can you hear me? Now am I audible?

Question: Jyoti Gupta - Nirmal Bang Securities Pvt. Ltd. - Analyst : Yeah. So I'm saying that my numbers are in line. So obviously, the thought process is quite well aligned. My question is while Morbi had been contemplating the shutdown, but nothing -- no such action has been taken. How has been the outlook in fourth quarter? How has been the situation so far because cement has picked up? And how does it -- and what about the first quarter of FY26? Is there any pickup in demand? And the other thing is, is it that the tiles is suffering because while the real estate is growing at a robust growth because of ultra-luxury segment where basically the demand is more for Italian models and less of tiles? Because the segment should have grown this second half, but it has not picked up. What could be the possible reasons from the export angle?

Question: Jyoti Gupta - Nirmal Bang Securities Pvt. Ltd. - Analyst : Sir, in the project sales, has it been consistent? Like, is it that demand is decent? It's only the retail, which is struggling? Or is it both, even the project sales is struggling?

Question: Jyoti Gupta - Nirmal Bang Securities Pvt. Ltd. - Analyst : Correct. So which means that this quarter, we -- again, you expect that the prices might -- there will be no increase in the prices for tiles. You don't -- obviously, because demand is still quite muted. So obviously, pricing will again take a hit this quarter as well?

Question: Jyoti Gupta - Nirmal Bang Securities Pvt. Ltd. - Analyst : Okay. So on the energy side, the power side, sir, any respite that we've got? Because I mean, do we see that while the demand would still be muted and prices may not increase, but there will be some respite coming from the cost front? So anything on that front in terms of the -- this thing.

Question: Jyoti Gupta - Nirmal Bang Securities Pvt. Ltd. - Analyst : My question is any -- can we expect a decline in cost for this quarter? Cost?

Question: Jyoti Gupta - Nirmal Bang Securities Pvt. Ltd. - Analyst : I meant fuel prices.

Question: Jyoti Gupta - Nirmal Bang Securities Pvt. Ltd. - Analyst : Okay. Thank you so much, sir. That is it.

Question: Onkar Ghugardare - Shree Investments - Analyst : Yeah. Given how the nine months have performed, you had earlier given a three-year guidance. So do you think you would have to revise that guidance?

Question: Onkar Ghugardare - Shree Investments - Analyst : Okay. And what about the EBITDA margin, sir? Do you think there is scope to move upwards from here on, or it would be somewhere in a similar range of 13%-odd?

Question: Onkar Ghugardare - Shree Investments - Analyst : Okay. And what would be the asset turns for the Nepal joint venture?

Question: Onkar Ghugardare - Shree Investments - Analyst : Okay. The last thing is on the payout. You have gradually increased your payout in the last one, two years. So with that, do you think it will continue? And how that would impact your ROCE?

Question: Onkar Ghugardare - Shree Investments - Analyst : Okay. Thanks.

Question: Yogesh Patil - Dolat Capital Market Pvt Ltd. - Analyst : Thanks for taking my question, sir. Sir, as you mentioned, domestic demand weakness and the challenges in the export market, particularly because of the freight rate. My first question is related to the freight rates for the export. As the Israel and the Palestine situation is at a ceasefire and a truce level, when do you expect that freight rate will cool down -- come down? And will it help you for your exports? That's one.

Question: Yogesh Patil - Dolat Capital Market Pvt Ltd. - Analyst : Correct, sir. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 10:30AM, KAJR.NS - Q3 2025 Kajaria Ceramics Ltd Earnings Call

Question: Yogesh Patil - Dolat Capital Market Pvt Ltd. - Analyst : Correct, correct, correct.

Question: Yogesh Patil - Dolat Capital Market Pvt Ltd. - Analyst : If we compare with the last year in the same period, how the freight rates are right now? You can give us a ballpark number.

Question: Yogesh Patil - Dolat Capital Market Pvt Ltd. - Analyst : Okay. Thanks. Sir, second question is related to, what are the major reasons behind the domestic demand slowdown? And how many months it will take to revive this demand or weakness? So sir, as per your experience, what would be the big trigger for the demand revival in medium to long term?

Question: Yogesh Patil - Dolat Capital Market Pvt Ltd. - Analyst : Lastly, we are reading that the ceramic plants are facing challenges of receivable days. It has been consistently increasing. Is it a real issue, sir? Can you throw some light on that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 10:30AM, KAJR.NS - Q3 2025 Kajaria Ceramics Ltd Earnings Call

Question: Yogesh Patil - Dolat Capital Market Pvt Ltd. - Analyst : Okay. And sir, if you allow me the last question related to cost of India.

Question: Yogesh Patil - Dolat Capital Market Pvt Ltd. - Analyst : Sir, propane prices are much cheaper compared to the PNG industrial prices. So any thoughts on that side? Will you switch to the propane side?

Question: Yogesh Patil - Dolat Capital Market Pvt Ltd. - Analyst : Thanks a lot, sir. This was really helpful.

Question: Vinamra Hirawat - JM Financial - Analyst : Hi, sir. Am I audible? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 10:30AM, KAJR.NS - Q3 2025 Kajaria Ceramics Ltd Earnings Call

Question: Vinamra Hirawat - JM Financial - Analyst : Sir, it seems difficult to meet our guidance of a second-half recovery, 9%, 10% volume growth with realizations bottoming out. Kajaria has done better than peers. But do you think this real estate cycle will be significantly different for tile players compared to the last where you had multiple years of double-digit sales growth because whether it's a weaker consumer, more competition, which have access to large amounts of capital or for any other reason?

Question: Vinamra Hirawat - JM Financial - Analyst : So sir, I can expect this real estate cycle despite higher competition in every price point to give us that same double-digit growth for consistent years going forward?

Question: Vinamra Hirawat - JM Financial - Analyst : Of course. Just another question. Sir, in the last call, you had stated that there was some margin pressure in the faucet segment because of increased cost of metal, which will be passed on. Have we taken any price increases in faucets this quarter? Is it around the corner? And yes, just any color on that?

Question: Vinamra Hirawat - JM Financial - Analyst : Okay, sir. Got it. Thank you.

Question: Pankaj Tibrewal - Ikigai Asset Manager - Analyst : Yeah, good evening, Ashok-ji. One thing which was a little bothering me on the overall results was the employee cost. So when I look at last year versus this year, the sales is absolutely flat. But almost 150 basis points has got increased on the employee cost, now 13% of sales. And when I look at all the companies in India with a gross margin between 35% to 40%, we have one of the highest employee cost. How do you address that? Because if market tends to be sluggish, then this is a sticky cost, which can remain with us for a long time and margins would be under pressure. Just wanted your thoughts on that side.

Question: Pankaj Tibrewal - Ikigai Asset Manager - Analyst : Okay, okay. So about 150, 200 basis points, which is looking higher right now.

Question: Pankaj Tibrewal - Ikigai Asset Manager - Analyst : Okay. That's heartening to hear there. And the second part is on the price realization side. How do you see it moving forward because your other expenses have also gone up when I look at. So from a realization perspective, over the next 12 months, even if the demand remains sluggish, is there a way in terms of premiumization or product mix which can help us on the pricing side?

Question: Pankaj Tibrewal - Ikigai Asset Manager - Analyst : Okay. So the margins, which have come to almost a very low level, you believe that it could move to 14%, 15% next year?

Question: Pankaj Tibrewal - Ikigai Asset Manager - Analyst : Okay, okay. Fair enough. And last but not the least, on the distribution side, the (technical difficulty) that there is a large market still untapped. And we have to move from 350, 370 pin codes to 540. Where is that distribution-led strategy? How is it working? Because in a market like this, you have to make sure that you enter new areas, take away market share. So (multiple speakers) --

Question: Pankaj Tibrewal - Ikigai Asset Manager - Analyst : Okay, okay. And last but not the least, in times of slowdown, always in every sector, we see the leader doing better and taking away market share. Somehow for us, it's not happening, though I appreciate on the balance sheet, you and Sanjeev-ii has done a great job in controlling the working capital cycle. But from a growth perspective, if you are having such a hard time, I'm sure the smaller players in the industry must be having a tough time. So we must be taking away market share from a balance sheet perspective, the strength, which we have. How should we look at this scenario right now from our understanding perspective because you are the leader of the sector?

Question: Pankaj Tibrewal - Ikigai Asset Manager - Analyst : Okay, thank you. All the best, Ashok-ji, and the entire team.

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Hello. Yeah, thank you for the opportunity. Can you give a bifurcation of the ceramic PVT, GVT for a quarter?

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Yeah.

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Okay. And also, if you can give the gas prices, Northwest and South and aggregate?

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Okay, okay. So -- and the next question is related to the Nepal project. There the increase of 1%, but there, the CapEx has increased significantly. So why is it so? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 10:30AM, KAJR.NS - Q3 2025 Kajaria Ceramics Ltd Earnings Call

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Okay. So -- and even the working capital CapEx has increased there quite significantly?

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Okay, okay. And also related to the Sanitaryware, in the last four quarters, we are seeing your growth is going down continuously. So even at this size, you are not able to grow in the market because of a demand is not there? Or is there a lot of a competitive intensity which is restricting you for a growth?

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Now, can you give some color what happened in the Sanitaryware plant? Sorry.

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Okay, okay. Got it. Last question, sir, related to the institution versus retail mix. Definitely, you maintain 70%, 75% retail. But over the last couple of quarters, as you had also highlighted, that the institution sales has increased. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 10:30AM, KAJR.NS - Q3 2025 Kajaria Ceramics Ltd Earnings Call So can you give a color in the last nine months and this quarter, how has been the mix change? And also some more color on the institution like direct to the large builder, or how much is contribution coming from that kind of businesses?

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Any number you want to highlight, like how much is institution right now versus 30% earlier?

Question: Praveen Sahay - Prabhudas Lilladher Private Limited - Analyst : Okay. Got it, sir. Thank you, and all the best.

Question: Rishikesh Srinivasan - Kotak Mahindra Bank - Analyst : Hi, good evening. So first is, thanks for clarification on the employee cost. But is there any noncash ESOP cost also that is sitting in the employee cost?

Question: Rishikesh Srinivasan - Kotak Mahindra Bank - Analyst : In this quarter, you are talking about?

Question: Rishikesh Srinivasan - Kotak Mahindra Bank - Analyst : Sorry?

Question: Rishikesh Srinivasan - Kotak Mahindra Bank - Analyst : No, no, only employee cost. Because there is an ESOP cost also generally that sits in there. So just clarifying on that.

Question: Rishikesh Srinivasan - Kotak Mahindra Bank - Analyst : Okay, okay. The second is, a lot of discussion on call happened on clearly institutional mix being higher this quarter. But just from the product mix in sense that we supply to institutional, is there a change also intent, and that is getting reflected in realization? Or is it higher discounting only?

Question: Rishikesh Srinivasan - Kotak Mahindra Bank - Analyst : Okay, okay. And lastly, in terms of the reported segments that we have, clearly, the non-tile segment, other segment there, the EBIT losses have come off. It's more to do with plywood sales -- reduction in plywood sales, right, ramp down of plywood sales, lower sales in plywood. The Bathware losses seems to have gone up.

Question: Rishikesh Srinivasan - Kotak Mahindra Bank - Analyst : So in other segments, the non-tile segmental margins that we provide in our press release, P&L.

Question: Rishikesh Srinivasan - Kotak Mahindra Bank - Analyst : So in that if I look on the EBIT losses there, I think that has come off. But clearly, is it more to do with lower plywood sales? That's how we should read it. The Bathware losses persist, right?

Question: Rishikesh Srinivasan - Kotak Mahindra Bank - Analyst : Okay, okay. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 10:30AM, KAJR.NS - Q3 2025 Kajaria Ceramics Ltd Earnings Call

Question: Souvik Mohanty - Nuvama Wealth Managemen - Analyst : Hi, sir. Thank you for taking the question. I just had one question in terms of -- can you help me understand how much -- how many months of inventory do the distributors hold? And has there been any major change in the last one year?

Question: Souvik Mohanty - Nuvama Wealth Managemen - Analyst : (technical difficulty)

Question: Utkarsh Nopany - BOB Capital Markets Ltd. - Analyst : Yeah. Hi, good evening, sir. Sir, my first question is like whether our understanding is clear that we are mainly dependent on outsourcing model to grow our sales volume, as our domestic capacity operated at 105% rate in previous December quarter, and our outsourced sales volume grew by 17% on a YoY basis in December quarter? And what could be our maximum capacity utilization for our domestic tile plant on an annualized basis, as per you?

Question: Utkarsh Nopany - BOB Capital Markets Ltd. - Analyst : No, sir. My point was that like our manufacturing sales volume is going to remain flat only going forward because what we are noticing that whatever the incremental volume is coming, that is mainly coming from the outsourced model. And is that going to continue going forward also? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 10:30AM, KAJR.NS - Q3 2025 Kajaria Ceramics Ltd Earnings Call

Question: Utkarsh Nopany - BOB Capital Markets Ltd. - Analyst : Okay. Sir, second question is like we are planning to acquire 75% stake in a group entity called Kajaria Adhesives Private Limited as we are planning to put up a tiles adhesive plant in Tamil Nadu. So wanted to know why we are not acquiring the entire 100% stake in that company?

Question: Utkarsh Nopany - BOB Capital Markets Ltd. - Analyst : Okay. And sir, like what would be our advertisement cost for December quarter?

Question: Utkarsh Nopany - BOB Capital Markets Ltd. - Analyst : And sir, lastly, like if you can provide the EBIT margin guidance for the tiles and non-tiles segment for FY26?

Question: Utkarsh Nopany - BOB Capital Markets Ltd. - Analyst : Okay. Thanks a lot, sir.

Question: Onkar Ghugardare - Shree Investments - Analyst : Yes, sir. My question is regarding -- you earlier mentioned that you will be trying your best to achieve the guidance, which you had given. But I mean, even if you do around INR4,700 crores of sales this year, considering a 10% growth in the fourth quarter, you would still have to grow around 17%, 18% to meet that guidance. And you had given a CAGR of 12%.

Question: Onkar Ghugardare - Shree Investments - Analyst : And similarly, you had given 15% to 17% guidance. How realistic is that in next two years to achieve that?

Question: Onkar Ghugardare - Shree Investments - Analyst : So you had given this guidance a year back. That's what I'm asking.

Question: Onkar Ghugardare - Shree Investments - Analyst : Okay, thanks.

Question: Rishab Bothra - Anand Rathi Securities Private Limited - Analyst : Hello, sir, good afternoon. Just wanted to understand whether we track residential, commercial, and infra consumption. Which segment is the fastest growing for us?

Question: Rishab Bothra - Anand Rathi Securities Private Limited - Analyst : And lastly, sir, in residential, do we eye for large housing projects or standalone projects as well? Both are our focus area?

Question: Rishab Bothra - Anand Rathi Securities Private Limited - Analyst : Okay. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 10:30AM, KAJR.NS - Q3 2025 Kajaria Ceramics Ltd Earnings Call

Question: Pulkit Patni - Goldman Sachs (Asia) L.L.C. - Analyst : Sir, thank you for taking my question. I mean, most of the questions are answered. I just wanted to pick your brain on, has anything changed in the industry in the last four, five years, whether it is in respect of competition, whether it is in respect of technology? Are your peers now being able to produce the same product as you? Or is there some change between marble and ceramic? I mean, I just wanted to get a sense because multiple people have asked this question in different ways. But if real estate sale is strong, eventually, it has to result in some bit of retail sale, right? If the builder is making the lobby, the flat also is required to be made. So any sense on if anything has changed in the industry in the last four, five years based on your experience and expertise?

Question: Pulkit Patni - Goldman Sachs (Asia) L.L.C. - Analyst : No, no, fair. I mean, you've always been the leader. So my question was more about something that you were doing, which competition is doing. Maybe let me just extend that one step further. Do you think the supply situation is much worse, i.e., there's much more excess supply today than it was a few years back in this industry?

Question: Pulkit Patni - Goldman Sachs (Asia) L.L.C. - Analyst : Sure, sir. This is helpful. Thank you.