Is Murudeshwar Ceramics a risky investment right now? Why?

Murudeshwar Ceramics was incorporated on June 29, 1983. The company is a manufacturer of ceramic glazed floor tiles. The company was promoted by R N Shetty and his associates and Karnataka State Industrial Investment & Development Corporation (KSIIDC) in the joint sector.

Murudeshwar Ceramics Showroom in Karnataka

It is among the major producers of ceramic tiles in India along with the following players:

1. Asian Granito India Limited
2. Euro Ceramics Limited
3. H & R Johnson (India) Limited
4. Kajaria Ceramics Limited
5. Nitco Limited
6. Orient Bell Limited
7. Varmora Granito Private Limited
8. RAK Ceramics India Private Limited
9. Somany Ceramics Limited
10. Murudeshwar Ceramics Limited

Ceramic Tiles used in Flooring and Bathroom

Like all other players, the major fillip to the performance of any player in the building space is spending. In the past 1–2 decades, the Government of India has been a major spender through capex plans. Other than this, in the past decade, we have seen a mild increase in the sale of residential and commercial buildings, which are also contributing to the growth of these companies.

Infrastructure push by the Government of India

With the Covid-19 impact mellowing and increase in offices, schools, etc. asking people to join the workplace instead of Work From Home (WFH), a fresh lease of expenditure is set to be triggered with co-working and rented venues again going to be in demand.

Co-Working Space: A go-to for IT Firms, Startups and Freelancers

Murudeshwar Ceramics sells its Ceramic Tiles under the brand name “NAVEEN”. The tiles are manufactured at two of its facilities located in Hubli, Sira (Karnataka), and Karaikal (Pondicherry), which are equipped with state-of-the-art technology, in technical collaboration with SacmiImola & Breton, Italy. To bring in sustainability, the company set up its own Solar and Wind energy plants as well as an STP(Sewage Treatment Plant) for increasing its green footprint in manufacturing.

Now let us come to the company and check its stock performance as it has been listed on the NSE and BSE and its stock performance can be seen as follows:

Stock Performance of Murudeshwar Ceramics Since Listing

We can draw some observations from the same

  • The company has performed marginally in the past 1-year
  • The company is a small-cap non-dividend paying company
  • Its rise in stock price was mostly in the second half of the 2000s when industrial and other economic activities were on an upswing prior to the Global Financial Meltdown of 2008–09
  • ROCE of the company has been in the range of 4–5.5%
  • Investors have seen a decline in their capital exceeding 30% in the past 5-years

Other than the observation points, as ceramic tile manufacturers export their product to the overseas market and import some raw materials, they are susceptible to a weakening of the rupee & strengthening of the dollar along with an increase in input cost that also includes energy costs.

Intricate Relationship of Rupee-Dollar

The major trigger for entering the stock should be an improvement in the ROCE value. Other than this, the company has reported an increase in debt and a lowering of the debt-coverage ratio by almost ~50%.

Considering all the scenarios, my personal view is that investors should stay away from the stock despite its low price seeming lucrative.

Hope this helps

You can follow my blog or Facebook page on investing for getting insight into other stocks.

Happy Investing!!

References:

  1. Murudeshwar Ceramics: Reports, Company History, Directors Report, Chairman’s Speech, Auditors Report of Murudeshwar Ceramics – NDTV
  2. Exports – NaveenTile
  3. Ceramic Tiles Market in India (2018-2023) with Market Share data on Manufacturers, Wholesalers, Retailers, Contractors, and Distributors
  4. Murudeshwar Ceramics (NSE: MURUDCERA) Is Finding It Tricky To Allocate Its Capital
  5. Infrastructure Development in India: Market Size, Investments, Govt Initiatives | IBEF
  6. What does Weakening Rupee Against Dollar Signify
  7. https://www.naveentile.com/wp-content/uploads/2021/09/Annual-Report-2020-21.pdf

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Blog at WordPress.com.

Up ↑

%d bloggers like this: