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#kajariaceramics Q1 23 Concall Highlights

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1. Sales volume of 23.33 million square meters in Q1 FY2023. In Q1 consolidated revenue from operation increased by 80% on a year-to-year to Rs.1008 Crores from Rs.562 Crores in Q1 FY2022 because

of a lower base.

2. EBITDA margin for this quarter stood at 15.23% as compared to 14.32% in the corresponding quarter of the previous year.

3. Revenue from the bathware segment grew by 93% from Rs.37 Crores to Rs.71 Crores in Q1. Revenue from the plywood segment grew by 279%

from Rs.5 Crores to Rs.20 Crores in Q1.

4. In the Q1 the north prices for gas were around Rs.52, south was about Rs.60 and west was about Rs.67. Prices are very fluctuating right now. Gas is around 38% of company’s cost.

5. Tile demand scenario continues to be healthy given traction in the real estate sector despite high input costs and increasing interest rates. There is a greater momentum in the tier II and below markets vs the metros. With India's GDP growth pegged at 6% to 8% over the next

couple of years, the domestic tile industry could witness a similar demand growth, especially driven by the government's push for investment in infrastructure and low-cost housing.

6. Only major headwind for the industry is the possibility of further rise in energy prices.

It is difficult to predict how the current scenario of geopolitical tensions, escalating inflation and supply disruptions will play out.

7. Kajaria is also struggling to get gas because GAIL is having a lot of problem. Their some of the cargos have not been delivered.

There was a full capacity utilization despite energy supply disruptions and unprecedented increase in energy costs.

8. This year remains challenging for the industry due to escalating costs for almost all inputs. Industry has struggled to pass on cost to end users.

It was difficult for Kajaria as well, but they leveraged their brand equity to drive a 2% price increase in May 2022. This helped the company to maintain margin at around 15%

9. New capacity of slab manufacturing at Srikalahasti, which got commissioned in May 2022, has also

helped in maintaining the margin. This plant has the most advanced technology Continua+ from Sacmi Italy for slabs manufacturing in South India. Kajaria started the journey 33 years back with the manufacture of 4 inch by 8 inch tiles and now they are making four feet by 8 feet

tiles slab at this plant. Kajaria is also looking for modernizing one of its north plants with the same Continua+ technology.

10. Kajaria acquired South Asian Ceramics, the plant which is one hour from Hyderabad Airport. It mainly manufactures two sizes 60x60 and 60x120

centimetres ceramic floor tiles. The installed capacity is 4.8 million square meters and the company is doing this acquisition to strengthen their base in south mainly by cutting the transit time from Morbi, trying to service the smaller dealers and increasing the rotation of the

tiles of the dealers based in South India. Cost for company was 120 cr. Kajaria is looking at revenue of 130 Crores in 2022-2023 going up to 180 Crores in 2023- 2024.

11. Capex plan should be anywhere between 200 and 250 Crores for each year with volume growth of 15%.

These will be funded from internal accruals.

12. Kajaria's growth will outpace that of the industry and will deliver around 15% plus volume growth in FY23 on the back of a) improving demand from tier II & below cities, b) distribution expansion, and c) domestic market share

gains as Morbi players are continue to focus on exports.

13. Advertisement was 19cr in 1st quarter. Fourth quarter was 32 Crores and last year total spend on advertisement was 80 Crores. This year total ad spends plan is around 100 cr.

14. 16000 Crores is a minimum exports which India will do in the FY 23. In Europe, electricity prices have gone up by 300%, gas prices have gone up by 400% and they are not getting enough gas so a lot of plants are closed in Spain and Italy. Even China’s gas prices have gone up

by almost 60%-70%. So India is in a very competitive position and India is the number two producer in the world after China as far as capacity is concerned.

15. Morbi announcing the closure for one month. They are closing their plants from August 10, 2022 to September 10, 2022

there will be no dispatches from August 15, 2022 to September 15, 2022 and 85% of Morbi will be closed, some JVs will be working, some people who are based on exports will be working and you can roughly take that 85% capacity will not be working. Kajaria is not taking any

shutdown. Outsourced vendors, 70% are working 30% who are smaller players have to close down and rest are building up stocks to make sure that the company do not have any problems in sales from their outsourced people. In China they have a Chinese New Year they shut down their

plants for four to six weeks, in Europe Spain and Italy they down their plants in the month of August for almost a month. Morbi manufacturers will close for one-month every year, timing might differ.

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