Murudeshwar Ceramics - Rs.111.00

Promoted by Mr. R.N. Shetty in 1983, Murudeshwar Ceramics Ltd. (MCL) is a part of the reputed RNS Group with diversified interests in construction, hotel, power, engineering, auto, IT and education. In 1994, it was the first company to start manufacturing vitrified tiles with an initial capacity of 2,000 sq. mt./day and is one of the major players in this segment with more than 30% market share. Notably, 60% of sales come from institutional supplies to big builders like Hiranandani, Rahejas, Shobha, Mahindra Gesco, L&T, Mantri, Metro Rail, AAI, ICICI, HDFC, Wipro etc. Balance 40% comes from the retail market which it has 75 showrooms and 250 wholesale distributors across India. Although the company had exited the ceramic tiles business earlier due to strong demand it re-entered this business from FY06. It also has small 100% EOU granite division in Bangalore.

Located in Hubli (Karnataka) and Karaikal (Pondicherry), MCL’s manufacturing facilities are equipped with state-of-the-art technology in technical collaboration with Sacmi Imola & Breton, Italy. After its recent expansion, the total production capacity on stands at 21000 sq. mt./day of vitrified tiles and 20000 sq. mt./day of ceramic tiles. But its biggest strength is its captive mine for china clay and feldspar, which cater to 80% of its raw material requirements. It also enjoys substantial cost advantage at its Karaikal facility since it has an agreement with GAIL for supply of natural gas. Besides, it has access to grid power at a very competitive rate of Rs.3/kwh. The current capacity utilisation of Vitrified tiles unit is 85% and that of Ceramics tiles unit is 75%. To fulfill the increasing demand, MCL is further expanding its vitrified tile capacity by 4000 sq. mt./day. Incidentally, the company has a 20 acres land near the Electronic City where it intends to develop an IT park in future.

Fundamentally as well as financially, the company is on a strong footing. It has huge reserves of more than Rs.200 cr. on its equity of Rs.17.50 cr. leading to a book value of around Rs.115. Despite stiff competition, it enjoys healthy EBITA margins of 15% in ceramic tiles and 30% in vitrified tiles. Recently, the promoters and Reliance Capital AMC got their 25 lakh preference shares converted into equity shares at Rs.124 per share. For FY07, the company is expected to clock a turnover of Rs.240 cr. with net profit of Rs.28 cr., which works out to an EPS of Rs.16 on its diluted equity of Rs.17.50 cr. For FY08, its revenue & PAT may shoot up to Rs.300 cr. and Rs.35 cr. respectively. Its share price has the potential to touch Rs.175 level in a year’s time and if the real estate story also pans out, then the scrip can go up to Rs.250 level.