R.A.K. CERAMICS

Recommendation history

• FY 2026HoldRAK Ceramics delivered modest revenue growth of 1.6% to AED3,284.6m, while gross margin expanded 70bps to 40.0% and EBITDA rose 5.3% to AED623.6m. However, regional and export weakness remains material—KSA revenue fell 17.7%, India 9.2%, and Europe 5.2%—while net debt increased to AED1,493.8m, making the risk/reward balanced rather than a clean buy.
• Q4 2026HoldHold: FY2025 EBITDA rose 5.3% to AED623.6m and net profit after minority interests increased 6.2% to AED243.7m, but revenue growth was only 1.6% and Q4 tiles and sanitaryware revenue declined 4.9% and 3.9%, respectively. The 10-fils-per-share proposed second-half dividend supports the yield case, yet 2026 capex is set to rise sharply to AED500m while KSA, India, Europe and Kludi remain unresolved execution risks.
• Q3 2025HoldHold: Q3 revenue rose 2.8% YoY to AED 824.9m and EBITDA increased 14.7% to AED 167.7m, but gross margin fell 70bp to 40.5% as competition pressured India and Bangladesh. The earnings quality is mixed: net profit after minority rose 22.8% to AED 66.9m, while net debt reached AED 1.64bn, leverage rose to 2.63x, and KSA revenue declined 24.7%; at roughly 6.9x LTM EV/EBITDA and 10.9x P/E, the valuation is reasonable but not compelling enough to offset execution and competitive risks.
• Q1 2025HoldHold: Q1 revenue was broadly flat at AED 776.5 million (-0.7% YoY), but EBITDA fell 10.3% to AED 135.6 million and profit after tax declined 22.3% to AED 48.9 million. Gross margin improved 33 bps to 39.7%, yet Kludi’s transformation, weak Bangladesh/Europe demand, competitive pricing pressure, and rising leverage to 2.49x net debt/EBITDA leave insufficient evidence for a clean buy.
• Q1 2025HoldHold: RAK Ceramics delivered largely flat Q1 revenue of AED 776.5 million (+0.7% YoY) and 39.7% gross margin, but reported profit after tax fell 22.3% to AED 48.9 million. The core UAE business remains healthy, while Bangladesh disruption and the unresolved Kludi turnaround offset growth; net debt rose to AED 1.43 billion and leverage to 2.49x EBITDA. The valuation is undemanding at roughly 6.9x LTM EV/EBITDA, with an attractive but conditional dividend policy, yet the stock needs evidence of sustainable earnings recovery before becoming a buy.
• FY 2025HoldRAK Ceramics is a hold, not a clean buy: FY2024 revenue fell 6.5% to AED3.23bn and EBITDA declined 8.5% to AED592.2m, despite gross margin expanding 143bp to 39.3%. The UAE’s 7.1% growth, stronger mix and 11.2x P/E provide support, but Bangladesh losses, a still-unproven KLUDI turnaround, 2.35x net debt/EBITDA and planned 2025 capex of AED350–400m keep execution and cash-flow risk elevated.
• FY 2025HoldHold: FY2024 revenue fell 6.5% to AED3.23bn and EBITDA declined 8.5% to AED592.2m, while net profit dropped 24.0% to AED221.1m after AED33.9m of UAE corporate tax. The improved gross margin of 39.3% and UAE growth of 7.1% are positives, but broad-based weakness across KSA, Bangladesh, Europe and other markets, alongside 2.20x net debt/EBITDA, does not yet support a clean buy.