Cera Sanitaryware Ltd. share price target

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.

Cera Sanitaryware reported a muted performance, slightly missing our estimates. It registered a Revenue growth of 8% to ? 428.9 Cr led by healthy replacement demand, with Sanitaryware / Faucetware / Tiles divisions growing at 6% / 11% / 8% respectively. The EBITDA / PAT witnessed a robust growth by 38% / 42% respectively, with EBITDA / PAT margins expanding by 431bps / 318bps at 20% / 13.2% respectively owing to the easing prices of Raw materials.

In Q1FY24, Cera Sanitaryware (CRS) reported consolidated revenue growth of 8% YoY with sanitaryware/faucetware segments growing ~7%/8% YoY, while tiles revenue grew 11% YoY. Operating margin expanded 59bps YoY (flat QoQ) due to lower raw material cost (-133bps/-140bps YoY/QoQ), partly negated by higher employee expenses (+92bps YoY), resulting in EBIDTA/APAT growth of 12%/43% YoY, respectively.

CRS plans to continue operating in primarily three segments i.e sanitaryware, faucetware and tiles and has no plans to diversify into newer areas as of now. The focus of the company will mainly remain on sanitaryware and faucetware segments.

Cera delivered an impressive set of numbers for quarter ended Mar’23 with Revenue growth of 20.9% YoY led by robust growth in the Sanitaryware and Faucetware by 18% and 29% respectively. The EBITDA recorded a healthy growth by 29% at ? 114 Cr during Q4FY23 over ? 88.28 Cr in Q3FY23.

Cera Sanitaryware (CRS) has reported better than expected consolidated revenue growth of 20.9% YoY (4-year CAGR of 6.3%) to ~Rs5.3bn (+16.3% QoQ) on a low base with sanitaryware/faucetware revenue growing 18%/29% YoY, while tiles revenue grew 14% YoY in Q4FY23.