Century Plyboards Gets 'Buy', Cera Sanitaryware 'Neutral' As Motilal Oswal Initiates Coverage

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Motilal Oswal Report

Century Plyboards - Rating 'Buy'/ potential upside 27%

We initiate coverage on Century Plyboards Ltd. with a Buy rating and a target price of Rs 958, premised on 36x Sep'27 P/E (same as its 1-year forward 10-year average). While the wood panel industry has faced multiple headwinds related to demand and margins over the past two-three years, the medium-to-long-term outlook remains intact, fueled by a jump in real estate registrations, commercial projects under implementation, a rise in private capex, and a demand shift to branded players.

We believe Century Plyboards is well placed to capitalize on a demand pickup in the housing sector. We see it as a strong play on the growing interior infrastructure market in India with a comprehensive product portfolio, strong brand recall, and a wide distribution network.

Century Plyboards commands better pricing power in the market due to its premium positioning backed by high brand recall, better channel support, and after-sales services.

We expect Century Plyboards to clock a 15%/32%/51% CAGR in revenue/Ebitda/PAT over FY25-28, after a low 12%/8%/5% CAGR during FY19-25.

The current depressed RoE/RoCE (due to heavy capex) is expected to improve to ~18%/23% in FY28 with a ramp-up in utilization.

Cera Sanitaryware - Rating - Neutral/ Potential upside 6%

We initiate coverage on Cera Sanitaryware Ltd. with a Neutral rating and a target price of Rs 5,842, based on 26x Sep’27 P/E (vs. its 1-year forward 10-year average of ~33x).

We assign a 15% discount to Kajaria Ceramics' target P/E of 30x due to its lower earnings growth expectation. Notwithstanding the prevailing economic slowdown, management maintains an optimistic demand outlook, underpinned by steady demand for home improvement.

Following a moderate 6%/7%/14% CAGR in revenue/Ebitda/PAT over FY19-25, we estimate a 9%/10%/8% CAGR over FY25-28E, respectively, in line with industry growth. Cera’s Ebitda margin is likely to remain stable in the 14-16% range, slightly lower than previously guided by the management.

Healthy operating performance, combined with a disciplined credit policy, will enable Cera to generate strong free-cash-flow (~Rs 6 billion over FY25-28), increasing its cash surplus to over Rs 10 billion in FY28 from ~Rs 6 billion currently. Although the substantial cash balance could suppress its RoE to ~16%, we estimate a high RoIC of ~47% in the coming years.

Kajaria Ceramics - Rating 'Buy'/ Potential upside- 15%

We like Kajaria Ceramics Ltd. due to its-

1. numero uno status in tiles,

2. execution capabilities,

3. strong FCF, and

4. focus on market share gains led by expansion in distribution reach.

Notwithstanding the near-term weakness in volume and margins, we believe Kajaria Ceramics' medium-to-long-term outlook is quite robust.

Management hopes for a demand revival from H2 FY26, aided by improving consumer sentiment due to easing inflation and cuts in GST rates on essential items.

Kajaria also aims for a 17%+ Ebitda margin to sustain, led by various cost optimization measures. Thus, after a low 8%/6%/4% CAGR in revenue/ Ebitda/PAT over FY19-25, we project a CAGR of 10%/20%/34% over FY25-28, with an RoE/RoCE/RoIC of ~18%/25%/36% and strong FCF (~Rs 5 billion annually).

Kajaria’s stock price has been consolidating for the past three years owing to a moderation in demand and margins. Driven by our expectation of improving demand, we reiterate our Buy rating on Kajaria with a target price of Rs 1,252, premised on 30x Sep’27E P/E.

A lower multiple to its 1-year forward 10-year average of ~40x is assigned, as volume recovery is yet to be seen.

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