Tile maker Kajaria Ceramics hopes to clock 7-8% year-on-year volume growth in the March quarter compared with flattish growth in Q3 as operations normalize. The third quarter was marked by weak demand and the company’s unification process to align sales operations, which led to dealer churn and temporary destocking. The unification process was aimed at ensuring dealers stock up on all Kajaria products to present customers a better selection of products.
Despite soft demand, production cuts in Morbi in Gujarat due to gas supply issues created an opportunity for Kajaria to gain market share. The management told PL Capital’s analysts that dealer inventory remains low (about 15 days), and with the Morbi shutdown (almost 25 days till mid-April), market share gains may sustain in the near term.
Morbi is a hub for tile manufacturing and contributes 70-75% of India’s total ceramic tile output. India’s tile industry is fragmented and largely unorganized. Tile companies in the unorganized sector usually focus on exports, but when overseas shipments slow down or there is overcapacity, competition tends to intensify in the domestic market—an unfavourable scenario for listed tile companies including Kajaria.
For now, Kajaria’s own production units are not facing any gas supply issues. While GAIL supply has not been disrupted, prices have increased, the management said. However, about 40% of subsidiary capacity is situated in Morbi, where Gujarat Gas supply has been disrupted. So, gas price volatility remains a key monitorable.
Kajaria increased prices (about 5% in mid-March and another 7-8% in March), with the full impact of these steps expected from April. Price hikes along with withdrawal of industry-wide discounting should help revive muted realizations.
Operating margin
Kajaria’s operating margin of 17.4% in 9MFY26 has improved from a 10-year average of 16.3% and it operates at an industry-leading margin, Anand Rathi Share and Stock Brokers said in a report on 15 March. For FY26, the operating margin is seen at 17-18%, aided by pricing actions and cost-effective measures. Premium brand positioning and a favourable product-mix also give it an edge.
The Kajaria stock has declined 5.15% on the National Stock Exchange (NSE) so far in 2026, versus the Nifty 500’s over 14% decline and a 10.2% drop in peer Somany Ceramics. Kajaria trades at FY27 price-to-earnings of 27x, Bloomberg data showed.
Anand Rathi said volume growth visibility is limited in the near term as incremental sales volume is mainly dependent on outsourced sales due to higher capacity utilization at its own and joint-venture-operated plants.