Cera - Near-Term Demand Tepidness, H2 FY24 To Be Much Better: ICICI Securities

ICICI Securities Report

We recently interacted with the management of Cera Sanitaryware Ltd. Key takeaways:

1. Demand scenario in Q2-to-date has been tepid as higher overall inflationary conditions have resulted in some temporary slackness. Cera expects demand to be much stronger in H2 FY24 and has reiterated its ~20% YoY revenue growth guidance for FY24.

2. Margins to remain steady at ~16% as raw material costs remain benign.

3. Brownfield expansion of faucetware facility has commenced production from September 2023 and will likely be a major growth driver.

4. Land acquisition for the sanitaryware facility is in final stages; will likely happen in Q3 FY24.

We continue to like Cera, as it could potentially be a significant beneficiary of the ongoing uptick in the housing market, and model revenue/profit after tax compound annual growth rate of 16.4%/22.3%, over FY23- 26E with healthy return ratios (return on equity of 20.2% in FY25E).

We maintain our estimates and 'Hold' rating with a rolled over December-24E target price of Rs 8,262 (earlier Rs 7,928), set at unchanged 32 times Dec-25E price-to-earning ratio.

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