Multibagger midcap stock to turn ex-dividend tomorrow. Should you invest?

Market


On BSE, KJC shares settled at 1,179.05 apiece down by 13.85 or 1.16% on Tuesday. The shares touched an intraday high of 1,192.80 apiece before correcting amidst a broader bearish market tone.

The mid-cap company’s market valuation is around 18,774.31 crore currently.

In the past three months, KJC shares have jumped more than 22% on D-Street. Although the yearly performance of the stock has been volatile. But, in two years, the shares have zoomed nearly 127%. The shares were near 520 per share level on September 14, 2020.

Kajaria Ceramics dividend

The company announced a final dividend of 3 (300%) per equity share having a face value of Re 1 each for the financial year ended March 31, 2022.

On August 31, in its regulatory filing, KJC said, “The final dividend on equity shares @ Rs. 3 per equity share of Re1 each, as recommended by the Board of Directors, if declared at the AGM, will be paid on or before Saturday, October 22, 2022.”

The eligible shareholders for the dividend benefit will be those whose name appears in the register at the end of business hours on Friday, September 16, 2022, which will be furnished by NSDL and CDSL.

Thereby, the shares will turn ex-dividend on September 15.

In the fiscal FY22, the company also paid an interim dividend of 8 per share (800%) aggregating to 127.34 crore.

Including the final dividend of 3 per share, KJC will pay a total of 11 dividend for the financial year which will aggregate to 175.09 crore.

Should you invest in Kajaria Ceramics shares? 

Jefferies in its note dated August 31, said, “We view KJC as a robust play on housing revival/home furnishing. Retain Buy with revised PT of 1,400 post-roll-over. Retain target PE at ~35x. KJC stays one of our Top SMID Picks.”

In the base case, Jefferies assigned a target price of 1,400 to the company. The brokerage’s report in this scenario said, “We stay bullish on the potential housing revival in India, optimizing mix in KJC (60% Value Added sales now), traction in new margin-accretive products and upward margin trajectory – leading to 20%+ EPS growth over FY22-25E. Also, exports by Morbi players could sustain pricing stability in domestic market.”

Meanwhile, in an upside scenario where Jefferies has set a target price of 2,000 on KJC, the report said, “Tiles industry touted to be one of the key beneficiaries of GST & E-Way Bill, unorganized segment at ~60-65% of total volumes. KJC is the market leader in organized tiles; could help gain traction ahead of peers. Pan-India entrenched footprint acts as a strong moat.”

Further, in the downside scenario where the target price is 800 is set, Jefferies report said, “Increasing competition, particularly from unorganized tile players in Morbi, Gujarat, India, leading to volumes & pricing pressures on organized players, posing a risk to KJC’s market share.” Also, higher-than-expected input cost headwinds (sharp spike in gas prices), may impact gross margins. Additionally, the slowdown in economic growth and spending, and the slackening pace of value-added new product launches are some of the key risks.

As per Jefferies’ report, Morbi players seem unlikely to divert bulk of production volumes to the domestic market – this bodes well for domestic pricing and profitability – KJC is the market leader. Also, price hikes by Morbi would converge their pricing differential with organized players. Over FY22/25e, the brokerage expects KJC to deliver 17%/22% sales/PAT CAGR, a volume CAGR of 13%.

The company produces various categories of tiles, including kitchen tiles, bathroom tiles, wall tiles, floor tiles, and exterior wall tiles.

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