Building Products: Favorably Positioned for Growth

Research evidence excerpt

Building Products: Favorably Positioned for Growth

Asia Pacific InsightM

Kajaria

Kajaria is India's strongest tiles franchise, supported by market leadership, brand

equity, extensive retail distribution and strong profitability. We expect the

company to continue benefiting from housing demand, premiumization and

gradual formalization of the tiles industry. While bathware and adhesives provide

incremental growth opportunities, we expect tiles to remain the primary earnings

driver over the medium term. However, unlike Astral, Kajaria operates in a category

where industry growth is more dependent on housing demand and market-share

gains. While strong cash flows, balance-sheet strength and disciplined capital

allocation provide downside support, we see relatively lower medium-term

earnings growth potential given Kajaria's greater reliance on market-share gains

rather than superior category growth.

Key risks: Upside: Stronger housing recovery, higher market-share gains and better

realization environment. Downside: Re-emergence of Morbi competition, weaker

tile demand and prolonged gas-cost inflation.

India's leading tiles franchise, albeit in a competitive industry

We believe Kajaria remains the highest-quality franchise within the Indian tiles industry.

The company has built its leadership position through a strong brand, extensive retail

reach, product breadth and industry-leading scale. These advantages have enabled Kajaria

to consistently outperform peers on volumes, profitability and market-share gains over

multiple cycles.

While housing demand, premiumization and renovation activity should support long-term

industry growth, earnings growth in the tiles industry is increasingly driven by market-

share gains and execution rather than favorable industry structure.