Comparative Analysis of Ceramics Sector Stocks
In this article, we will do a comparative analysis of Kajaria Ceramics vs Somany Ceramics vs Asian Granito, stocks in the ceramics sector.
Kajaria Ceramics vs Somany Ceramics vs Asian Granito
Indian Ceramic Industry – Current Scenario
- The size of the total ceramic industry is close to Rs.27,000 Cr. Still, the revenue generation through the major national brands in ceramics sector (statewise or exclusive dealers) is merely Rs.12,000 Cr. The remaining almost Rs.15,000 Cr business is being contributed from regional brands or local players in the cearmics sector. The regional brands may be considered as a threat to the national ceramic brands due to the price-competition.
- But after the GST-implementation, the local/regional brands which were not compliance oriented earlier, can fetch problems due to it in the future. In such scenario, national well-established brands can be benefited from the same. Also, due to the increase in the disposable income, the customers are getting a lot of awareness towards the national ceramics brands.
- Kajaria Ceramics, incorporated in 1985, is the largest manufacturer of ceramic and vetrified tiles in India.
- The company manufactures more than 400 options of flooring solutions such as wall tiles, Ffloor tiles, vitrified tiles and Spanish and Italian tiles
- The company has an in-house research and development facility that focuses on developing new designs and creating cost effective products.
- Somany Ceramics which is incorporated in 1969, is also one of the key leader in Indian Ceramic sector.
- With the adopting forward thinking, an innovative and futuristic approach, Somany ceramics is at the very forefront of style and quality. Its product portfolio consist of ceramic glazed tiles, vitrified tiles, sanitary ware or porcelain floor tiles.
- Due to the constant endeavor to be the first to introduce new products in India, Somany has been, and will always strive to be a dynamic leader in its field.
- Asian Granito India is engaged in manufacturing of flooring solutions. It is incorporated in 1995, the company is one of the leading wall tile manufacturers in India.
- In wall segment, Asian Granito India are the biggest tile manufacture in India. The company has a marketing network of 18 depots at across the India, 10 Asian Exclusive showroom and 3000 business associates.
- Kajaria Ceramics is the largest listed ceramic company in India according to the market capitalization, revenue and sales. Market cap of Kajaria is almost Rs.9,200 Cr.
- After Kajaria ceramics, the Somany Ceramics and Asian Granito India are the two major comapanies in Indian ceramic sector with the market capitalization of Rs.1,860 Cr and Rs.767 Cr respectively.
Profit After Tax (PAT) TTM
- While analysing an Indian-based company with a number of subsidiary in different countries, we should consider the consolidated financial results of that parent company. Thus, the overall revenue or net profit of all the businesses should be taken into consideraion.
- The Profit after tax (PAT) for trailing twelve months (TTM) of Kajaria ceramics (consolidated) is Rs.229 Cr. The PAT numbers (TTM) for Somany & Asian Granito are Rs.47 Cr and Rs.20.71 Cr respectively.
- PAT Margin of Kajaria cearmics is 7.75%. While the percentage of PAT margin for Somany is 2.73% and for Asian Granito is 1.74%.
- We can see there is a considerable difference in the PAT margin percentage figures of Kajaria and Somany as well as Asian Granito. So, here also Kajaria ceramics is a clear winner.
Return on Capital Employed (ROCE)
- ROCE = (EBIT / Total Capital Employed)
- ROCE of Kajaria cearmics is 26.10%, while ROCE numbers of Somany and Asian Granito are 15.25% and 15.85% respectively.
Return on Equity (ROE)
- ROE = (Net Income / Shareholders’ Equity)
- ROE numbers of Kajaria, Somani and Asian Granito are 18.60%, 13.38% and 12.60% respectively. Thus, we can see that Kajaria is having higher ROE than the other two.
Price-Earning ratio (P/E Ratio)
- PE ratios of Kajaria ceramics, Somany and Asian Granito are 40.9, 33.21 and 37.08 respectively.
- In this case, Kajaria ceramics is enjoying the premium valuation as compared to its peers due to the higher PAT margins, ROCE and ROE numbers.
Debt to Equity Ratio (D/E RATIO)
D/E ratio of Kajaria is 0.06. While D/E ratio of Somany and Granito are 0.84 and 0.73 respectively which are very high in comparison with Kajaria ceramics.
Interest Coverage Ratio
- When any stock is having higher D/E ratio, we should always consider its interest coverage ratio while analysing the stocks.
- The interest coverage ratio of Kajaria, Somany and Asian Granito are 24.28, 3.01 and 1.82 respectively.
- Interest Coverage Ratio plays an important role where the working capital requirements are high. The more the interest coverage ratio, the better it is for the company.