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Sunday 9 June 2013

Cera Sanitaryware - Stock Update

I was reading the latest annual report for Cera and I am capturing the key points here:
  • Company’s brand extension to other related categories like showers, faucets, PVC cisterns and seat covers has helped in accelerating the growth.
  • This year Cera forayed into tiles in a modest way and launched digital wall and floor tiles, vitrified tiles in both soluble salt and double charge and also regular porcelain tiles.
  • Even though there was significant drop in construction sector in the fiscal under review, Cera was unaffected by sporadic upheavals in construction activities because of its well-established mid-segment product positioning in the market. The demand in mid-segment housing is likely to be least affected by any impending slow-down and hence the company is confident of maintaining its growth rate.
  • Vikram Somany got a total salary of 3.3cr which was up from 2.5 cr last fiscal.
  • Promoters hold 55.5% of the stock (no major change since last year)
  • Revenues of 487 cr and Net Profit of 46.21 cr.
  • EPS was 36.51 up from 25.32 a year back (up 44.91%)
  • Paid a dividend of Rs 4, up from Rs 3 in 2011-12.
FY14E EPS ~ 40-41
FY15E EPS ~ 52-53
Expected PE range (low – high) – 10-15

I am expecting a price of close to 600 at FY14 end, which is about 13% up from the CMP of 530. And
750 by FY15, which is about 40% higher from current levels. A good buying zone is 450-475, if the price gets to that level. I would NOT buy at current levels.

Disclosure: I am invested in Cera Sanitaryware and have a vested interest in the stock.


  1. Strange that you are expecting a poor 12% growth in EPS next year. I think it should do a 30-35% growth next year. Plus it is reaching the magic figure of 1000cr market capitalization when pe expansion happens (see Astral, and Ajanta). It can reach a pe of 18-20 in such case.

    1. Hi Subash,

      You are right. I am treading on the side of caution. Growth may be impacted if the economy does not pick up. I will revisit the numbers after their first 2 quarter results. PE expansion is possible, but not something that can be counted on. Also, as a conservative buyer, I would be reluctant to pay more than 15 times for Cera. Their latest foray into tiles will take it into a highly competitive market with Kajaria, Somany and others fighting it out there.

      If they make 30-35% growth next year, then it will be a bonus for us investors!!

  2. Hi Abhishek,

    Lot of small firms are facing closure at Morbi based on acute fuel shortage.


    How would this impact Cera and Kajaria according to you ?

    1. Difficult to say. But both Cera and Kajaria have significant manufacturing capacity in Morbi so a coal shortage would mean higher input costs and reduced margins. On the positive side, it is also likely to take very small local producers out of business and reduce the lower end of the competition.

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