Cera, Somany, Kajaria, Carysil - Leading Players Gaining Market-Share With Robust Cash Flows: Systematix

We initiate coverage on India’s ceramic tiles and bathware industry with a constructive view.

<div class="paragraphs"><p>Close view of a person choosing tiles. (Source: freepik)</p></div>
Close view of a person choosing tiles. (Source: freepik)

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Systematix Research Report

We initiate coverage on India’s ceramic tiles and bathware industry with a constructive view. Factors such as-

  1. low per capita consumption in the segment,

  2. consumers’ rising aspirations and affordability, and

  3. government’s thrust on building smart cities and affordable housing, are the key enablers that would give a thrust to the sector.

Kajaria Ceramics Ltd. and Cera Sanitaryware Ltd. have sustained market-share gains without compromising on financial discipline and cash flows (operating cash flow/profit after tax over 100%). The companies continue to focus on channel expansion and branding.

Somany Ceramics Ltd. on the other hand, despite having faced a tough period during FY17-20 due to industry and company-level issues, has emerged stronger through corrective actions (credit discipline, cash flow focus, etc.).

Price corrections in tiles stocks in last one year (on muted growth and margins; rebound likely Q4 onwards) have rendered Kajaria Ceramics and Somany Ceramics’ current valuations reasonable at 29 times and 14 times FY25E earnings per share, respectively, for a 15-20% return in a year.

Even though Cera’ stock price has risen ~45% in last one year on superior financial performance, we expect market share gain-driven performance to sustain. Key risks to our call: slowdown in economic and housing activity, keener competition.

Click on the attachment to read the full report:

Systematix Ceramic Tiles and Bathware Industry - Sector Initiation.pdf


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