# Kajaria Ceramics Q2 FY27: Strong Earnings, a Morbi Tailwind and a Capacity Push > Kajaria Ceramics posted a strong Q2 FY27, with revenue up 24% to INR 1,468 crore and net profit up 43% to INR 192 crore. A gas crisis that shut down nearly half of Morbi's tile factories has made Kajaria's tiles more price competitive than they have been in years, and management is using that window to take market share. - **URL**: https://www.arihantplus.com/blogs/stocks/kajaria-ceramics-q2-fy-27-strong-earnings-a-morbi-tailwind-and-a-capacity-push - **Category**: Stocks - **Author**: [Arihant Team](https://www.arihantplus.com/author/arihant-team) - **Published**: 2026-11-03 - **Updated**: 2026-11-03 - **Reading time**: 6 minutes read --- ## Introduction India's tile industry does not get much attention from investors, but it is one of the clearest examples right now of how a crisis in one part of the market can quietly reshape competitive dynamics for everyone else. When the West Asia conflict disrupted gas shipments through the Strait of Hormuz earlier in 2026, it hit Morbi, Gujarat, hard. Morbi produces more than 80% of India's ceramic tiles, and most of its factories run on gas and propane sourced through that corridor. Gas prices surged roughly 70%, propane supply dried up, and an estimated 40 to 50% of Morbi's plants shut down. Small producers, operating on thin margins and spot gas contracts, were forced to hike tile prices by 35 to 40% just to survive. Kajaria does not manufacture in Morbi. Its plants sit in Rajasthan and Andhra Pradesh, where gas costs were significantly lower, around INR 70 per SCM compared to roughly INR 91 per SCM in Morbi. So the company raised prices by only 12 to 13%, and the price gap between a Kajaria tile and a Morbi tile narrowed from around 40% to 20 to 25%. For a brand that has always carried a premium, that is a big deal. At the current market price of INR 1,119, the company's market capitalisation stands at approximately INR 17,580 crore. ## Q2 FY27: How did Kajaria Ceramics perform? [**Kajaria**](https://www.arihantplus.com/stocks/kajaria-ceramics-ltd) reported a clean set of numbers in Q2 FY27 (July to September 2026), with growth visible across revenue, volumes, margins and profit. * **Revenue:** INR 1,468 crore, up 24% from the same quarter last year and 10% higher than the previous quarter. Volume growth of 10% year on year was the primary driver, supported by selective price increases of 12 to 13% that were passed on without losing share. * **Operating profit (EBITDA):** INR 287 crore, up 34% year on year, with an operating margin of 19.5%. To put that in context, for every INR 100 of revenue, the company held on to roughly INR 20 as operating profit, a healthy margin for a building materials business where raw material and energy costs can swing unpredictably. * **Net profit:** INR 192 crore, up 43% from Q2 last year, with a net margin of 12.9%. This was a meaningful step up from the 11.3% net margin a year ago, though still within the range the company has historically operated in. * **Volume growth:** Tile volumes grew 10% year on year, with production volumes rising in parallel. Management has guided for continued double digit volume growth across H2 FY27 and into FY28, targeting total sales volume of approximately 130 million square metres (MSM) in FY27 and 145 MSM in FY28. * **Dividend:** The board declared an interim dividend of INR 12 per share, with a record date of 29 October 2026 and payment expected by 22 November 2026. Morbi producers, facing gas costs that had risen 35 to 40%, were forced to hike tile prices aggressively. Kajaria, sitting on a much lower cost base, chose to raise prices by only 12 to 13%. The result was a narrowing of the price gap between Kajaria's products and Morbi's unorganised output, from roughly 40% to 20 to 25%. Kajaria's tiles became meaningfully more competitive on price, without the company actually discounting anything. Management chose not to take further price hikes, opting instead to use the narrower gap to win volume share. ## What is Kajaria Ceramics planning next? 3 priorities emerge from the Q2 FY27 management commentary: * **Capacity expansion:** This is the company's biggest investment cycle in recent years. The brownfield GVT expansion at Srikalahasti (Andhra Pradesh) has been upsized from 10 MSM to 12.5 MSM, with the project cost revised upward to INR 340 crore from INR 210 crore to accommodate a larger shed and warehouse. A third tile adhesive plant at Durgapur in West Bengal has also been approved at INR 34 crore, with commissioning expected by December 2027. * **Bathware and adhesives:** This segment is emerging as a genuine diversification story. Revenue is projected to rise to roughly INR 400 crore in FY28, up from around INR 125 crore last year. The company described the segment as high margin and ROCE accretive, which, if it holds at scale, would add a layer of earnings quality that a pure tiles business does not naturally offer. * **Fuel cost management:** Kajaria is working on shortening kiln firing cycles through a 3 to 4 month project that began in January 2027, which should meaningfully reduce fuel costs. Biofuel already accounts for roughly 30% of energy usage at the company's North plants, and this ratio is expected to be replicated at its South plants over time. ## What are the risks? * **Morbi normalisation:** Morbi gas crisis gave Kajaria an unusual competitive window, but gas supply has been gradually restored since April 2026, and if prices normalise further, the cost gap between Kajaria and Morbi producers will widen again. * **Capex execution:** The company is running two large projects simultaneously, Srikalahasti and Gailpur, both of which are expected to commission within the next 6 to 12 months. Mining and construction projects of this scale are often subject to delays, and the Srikalahasti project has already seen its cost estimate revised upward by more than 60%. Until these plants are operational and running at full utilisation, the growth they promise remains on paper. * **Margin ceilings:** Management has guided EBITDA margins in the 18 to 19.5% range going forward, suggesting that the current quarter is close to the upper end of what the company considers sustainable. The company has explicitly said it is prioritising volume over margin expansion, which means profit growth will be more dependent on topline momentum than margin improvement from here. * **Outsourcing reduction risk:** As new capacity comes online, outsourced volumes from Morbi are expected to decline from roughly 42 MSM in FY27 to 36 to 37 MSM in FY28\. ## Investor takeaway Kajaria had a strong quarter, the Morbi crisis gave the company a rare window to compete on price without actually discounting, and management used it to take share rather than extract margin. Whether that turns out to be a smart long term play depends on whether the new capacity gets absorbed and whether the market share gains hold once Morbi normalises. For now, the numbers are solid, the balance sheet is clean, and the company's capex is encouraging. What matters most over the next two to three quarters is not whether revenue keeps growing, but whether the share gains prove sticky and the new plants deliver returns. --- *Investments in securities markets are subject to market risks. Read all the related documents carefully before investing. This content is for educational purposes only and does not constitute investment advice. Arihant Capital Markets Ltd. is a SEBI-registered stock broker.*