Cera Sanitaryware Ltd. share price target

We initiate coverage of Cera Sanitaryware Ltd. with a BUY recommendation and a target price of Rs 8,500/share, implying a potential upside of 31% from the CMP.

the retail space for CRS. CRS reported 5.8% growth in revenue with 130bps expansion in EBITDA margin in Q4FY25 due to cost management and operational leverage. CRS is expected to outperform the industry by 6-7%, with EBITDA margin of 15-16% by the end of FY26. The company continues to hold...

to gain insights into demand, competition, capacity expansion plans, and product diversification strategies for the near to long term. We believe demand challenges in the bathware segment will continue in the near term. However, the management expects demand to revive in Q2FY26. The company aims to drive growth through product diversification, focusing on premium offerings. In the long term, growth is expected to come from premium products, which are targeted to contribute to 10% of revenue in the...

The bathware industry slowed down from Q3FY24, but the company expects gradual pick-up in demand from H2FY25 onwards

Cera Sanitaryware’s H1 remained soft as revenue was flat at Rs8.9bn. EBITDA declined 11.4% y/y, while PAT inched up 1.7% y/y to Rs1.2bn.

CRS posted strong faucet revenue growth (+23% YoY) in a weak demand environment

We recently interacted with management of Cera Sanitaryware (CRS). Demand scenario in Q2-TD has seen some improvement QoQ but still remains sluggish.

In Q1FY25, Cera Sanitaryware’s (CRS) consolidated revenue fell 6.5% YoY with sanitaryware/ faucetware segments’ revenue dipping ~9%/5% YoY.

Sharp contraction in gross margin in Q4FY24 on higher discounts offered to dealers to push volumes in a weak demand environment

Q3 EBITDA fell 18% YoY and missed our estimate by 28% on subdued demand and higher brand & sales promotion expense

In Q2FY24, Cera Sanitaryware (CRS) reported consolidated revenue growth of 11.5% YoY with sanitaryware / faucetware segments growing 4.3%/15.7% YoY, while tiles increasing ~34% YoY. EBITDA margin improved 16bps YoY (+8bps QoQ), while gross margin shrank 296bps YoY (-197bps QoQ) due to RM pressure, whereas employee/other expenses dipped 76bps/236bps YoY, resulting in EBIDTA/APAT growth of 12.6%/14.4% YoY, respectively.

We recently interacted with the management of Cera Sanitaryware (CRS). Key takeaways: 1) Demand scenario in Q2- TD has been tepid as higher overall inflationary conditions have resulted in some temporary slackness. CRS expects demand to be much stronger in H2FY24 and has reiterated its ~20% YoY revenue growth guidance for FY24.