When P. N. Vijay identified Kajaria Ceramics as a potential multibagger in January 2012, nobody paid much attention to it. Kajaria Ceramics was then languishing at Rs. 98.
However, Kajaria Ceramics’ continued good performance over the few quarters got investors interested.
Heavy-duty investors like Morgan Stanley & HSBC Bank started buying a stake in the company. GMO Emerging Markets Fund bought a big chunk of 8,85,485 shares of Kajaria Ceramics in September 2012 at the price of Rs. 179 for a total consideration of Rs. 15.85 crores.
Now, the pinnacle has been reached for Kajaria Ceramics with it receiving the ultimate endorsement from Credit Suisse that it is a “Hot Stock”.
Credit Suisse pointed out that tile penetration in India is very low and that consumption should benefit from the housing boom and commercial developments in Tier 2 and 3 cities, and higher consumer aspiration.
Credit Suisse has put its faith in Kajaria Ceramics on the basis that the company is India’s second largest tile manufacturer and has about 9 per cent market share of the tiles market and about 18.5 per cent of the organised market. Consistent revenue growth is helping it build scale and it has had among the highest growth in the sector over the past few years.
Credit Suisse explained that Kajaria Ceramics has maintained 25 per cent-plus revenue growth for the past seven quarters and maintains a strong demand outlook for the near term. It estimates a revenue CAGR of 21 per cent between FY12 and FY15, and EBITDA and EPS CAGRs of 23 per cent and 32 per cent, respectively, over this period.
Credit Suisse also pointed out that Kajaria Ceramics’ valuations of 12.5x FY14E earnings was reasonable.
The best part is that Credit Suisse believes that Kajaria Ceramics has a price target of Rs 360, which means an upside of over 40 per cent to the current market price.
But in all this, one must not forget to compliment P. N. Vijay for his stellar stock pick.