23-Oct-2021

CERA SANITARYWARE LIMITED

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Cera Sanitaryware Limited manufactures, markets and distributes building products. Product offerings of the company are divided into
DHD
4 categories namely, sanitaryware, faucetware, tiles and wellness. It operates through the following brands; CERA, Senator, ISVEA,
JEET and Senator Cucine.

The company’s products include wash basins, urinals, flushing systems, bath accessories, faucet ranges, overhead showers, bathroom
allied products & bathroom accessories, wall & floor tiles, mirrors, kitchen sinks, and others. The company manages large format Cera
Style Studios in select cities, while dealers own and operate CERA Style Galleries and CERA Tile Galleries.

The company also operates in the packaging and polymer products space through joint ventures and subsidiaries. It had a distribution
network of ~15,000 across direct dealers and retailers as of FY21.

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DHD REVENUE MIX (FY21)

Segment wise City wise*

2%

21%
28%

49%
58%
14%
28%

Sanitaryware Faucetware Tiles Wellness Tier-1 Tier-2 Tier-3

*As per company’s classification.

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 GROWTH
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DHD SALES GROWTH

In FY21, the company’s net sales was at the same
level as FY20 and stood at ₹1,224 cr, with a growth of
~10% in the faucetware segment. All the other
segments saw a fall in revenue during the year.
Capacity utilisation across sanitaryware remained
low during Q3 and Q4 on account of fresh mould
making process and maintenance cycle of plants.
Additionally, in FY21, new product launches of the
company contributed ~20% of the revenue.
In Q1 FY22, net sales stood at ₹228 cr, lower on
account of disruption caused by the second wave of
Covid. Additionally, capacity utilization in
sanitaryware and faucetware plants was at 88% and
72%, respectively.

5 Year CAGR: 5.0%

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DHD EBITDA GROWTH

In FY21, EBITDA was ₹158 cr v/s ₹166 cr in FY20, a
fall of 4.8% YoY.
EBITDA fell on account of rise in purchases of traded
goods as well as increase in raw materials’ prices Q2
FY21 onwards.
In Q1 FY22, EBITDA stood at ₹21 cr, lower on account
of a fall in revenue. The company also witnessed a
rise in cost of materials consumed (constituting ~19%
of sales) during the period. Additionally, outsourcing
percentage for sanitaryware & faucetware segment
stood at 55%.

5 Year CAGR: 2.3%

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DHD PAT GROWTH

In FY21, the company reported a profit of ₹100 cr, a
reduction of 9.5% YoY.
The fall is largely due to lower EBITDA for the year.
Effective tax rate for the year was 25.8% v/s 17.9%
during FY20, due to deferred tax adjustment.
PAT was ₹12 cr, during the quarter. as

5 Year CAGR: 3.6%

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 GROWTH EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 PROFITABILITY
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DHD EBITDA MARGIN

In FY21, EBITDA margin contracted marginally due to
rise in raw material prices and logistics cost as well as
low capacity utilisation.
In Q1 FY22, the metric stood at 12.3%, lower on
account of rise in cost of raw materials.
The company believes EBITDA margin to be
sustainable at ~14.5%-15.5%, going forward.

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DHD PAT MARGIN

PAT margin has been stable in the past years at ~9%.

In FY21, margin contracted on account of lower PAT.

PAT margin in Q1 FY22 contracted to 5.3% due to
lower operating profit.

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DHD ROCE
The company has been able to maintain a healthy
ROCE in the past few years.
In FY21, ROCE was lower due to fall in profits for the
year. Additionally, capital employed rose on account
of increased retained earnings.

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DHD ROE
ROE has been on a downtrend due to muted profits
and rise in net worth, in the past few years.

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 PROFITABILITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 EFFICIENCY
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DHD CASH FLOWS

In FY21, cash flow from operations (CFO) was ~₹268
cr. CFO was higher despite reduction in profits
primarily due to working capital adjustments.
Reduction in inventory & trade receivables and a rise
in trade payables were the main items in working
capital adjustments.
Outflow from investing activity of ~₹242 cr was
primarily towards net investment in mutual funds.
The company also purchased property, plant &
equipment of ~₹14 cr.
Cash from financing (CFF), saw an outflow of ~₹19 cr
during FY21, constituting payment of short-term
borrowings, lease liabilities and interests.

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WORKING
DHD CAPITAL CYCLE
Over the years, the company has seen a rise in
working capital days.
During FY21, the company has made several efforts
to reduce the working capital days and consequently
the same has shown a decline.
In Q1 FY22, due to increased capacity utilization at
manufacturing plants and responsiveness of vendors,
the company was able to replenish its channel
inventory. This would result in higher capital
deployment in inventory and an increase in working
capital in FY22.

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 EFFICIENCY
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DHD FREE CASH FLOW

In FY21, free cash flow per share was ~₹197.
During FY21, capital expenditure remained low in
comparison to the guidance given by the company
due to COVID-19 related disruptions.
In FY22, the company plans to incur a capex of ~₹17
cr towards sanitaryware automation, faucetware
automation, customer touch points and logistics &
IT. Additionally, it does not have any major capacity
addition plans in the existing plants.

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 EFFICIENCY
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ASSET
DHD TURNOVER RATIO
In FY21, this metric dropped a little due to increase
in total assets of the company, driven by a rise in
financial investments.

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 EFFICIENCY EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 SOLVENCY
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DHD DEBT TO EQUITY

The company does not have any significant debt.
Long-term and short-term borrowings of the
company as on 31st March, 2021 stood at ₹43 cr and
₹30 cr, respectively.

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 SOLVENCY
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INTEREST
DHD COVERAGE RATIO
The company is well poised to meet its interest
liabilities.

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 SOLVENCY
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DHD CURRENT RATIO

The current ratio of the company has remained
relatively stable over the past few years at ~2x.
In FY21, this ratio rose on account of an increase in
current assets.

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 SOLVENCY EDGE METER: 5
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 VALUATION
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DHD PE RATIO
Cera Sanitaryware Ltd is currently trading at a TTM
PE multiple of 62.63x.
COVID-19 induced disruptions impacted the
performance of the company in FY21. TTM PE ratio
might be pushed upwards due to lower earnings
during the period.

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DHD DIVIDEND YIELD

It had been maintaining a dividend payout of ~14%-
16% over the past few years.
In FY21, the company paid a final dividend of ₹13 per
share and earnings per share (EPS) stood at ₹77.48.
Hence, a dividend payout ratio of 16.8%

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DHDTECHNICAL ANALYSIS
The stock had fallen from the range of ₹3700 in
January, 2018 to ₹2200 levels in Feb 2019. Thereafter
it had been consolidating between ₹2200- ₹3000
until it finally broke out in Nov 2020.
It has been rising steadily since then and in line with
our expectations found excellent support at ₹4200.
The stock witnessed a sharp upmove since end of
Sep 2021 and rallied by over 50% to test a lifetime
high of ₹6450 in Oct 2021.
₹4200 is likely to act as a strong base while a move
beyond ₹6450 would be required for a fresh
upmove.

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 VALUATION EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 QUALITY
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DHD MANAGEMENT
Management of the company continues to take
several steps for its growth in the coming years such
as right product mix, technology adoption in
manufacturing, constant brand promotion, wide
distribution and strong after sales service.
Narendra N. Patel ceased to be the Company
Secretary and Compliance officer of the company on
account of retirement as per company's policy w.e.f.
31st March, 2020. The Board of Directors appointed
Hemal Sadiwala as Company Secretary & Compliance
officer w.e.f. 1st April, 2020.

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SHAREHOLDING
DHD PATTERN
The promoter holding has remained constant at
54.48% for the last 9 quarters.
FII stake decreased from 15.44% in Q4 FY21 to
15.34% in Q1 FY22.
DII stake increased from 10.39% in Q4 FY21 to
11.12% in Q1 FY22.
Top Public Shareholding:-
Nalanda India Equity Fund Ltd. 9.98%
DSP Small Cap Fund, DSP Flexi Cap Fund 3.70%
UTI 3.60%
L&T Emerging Businesses Fund 2.57%

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 QUALITY
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DHD SECTOR POTENTIAL

• India’s sanitaryware market was valued at $665.36 million in 2020 and is expected to reach $1,074.71 million by 2027, at a CAGR
of 7.38% over the forecast period 2021-2027. (Source- blueweaveconsulting.com)
• On the basis of product, the sanitaryware market is segmented into toilet sink/water closet, toilet seats, bathtubs, faucets,
washbasin, urinals, showers, bathroom accessories, vanities, bidets, mirrors, cistern, and others. Amongst the segmentation, toilet
sink/water closet segment is estimated to have the largest share in the India sanitaryware market.
• Among the different types of ceramic tiles, wall tiles constitute 50% of the market share, followed by floor tiles (23%), vitrified
tiles and industrial tiles.
• Based on value, the size of the ceramic tiles market in India was worth ₹250 billion in 2017 and is expected to reach ₹501.7 billion
by the end of 2023, expanding at a CAGR of 13%.
• The Government’s emphasis on affordable housing has provided a demand boost to the industry.
• The residential sector dominates the demand generated for ceramic tiles in India with 70% market share, while the rest of the
orders come from the commercial and replacement sectors.

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COMPETITIVE
DHD LANDSCAPE
Cera Sanitaryware Limited is among one of the few
major players in the organized sanitaryware industry.
Sanitaryware market is segmented on the basis of
product quality. Cera is an established brand in the
mid to premium product category and has forayed
into the luxury segment with the launch of “ISVEA”.
Other popular brand names in the luxury segment
are Parryware, Kohler, etc.
Lower-end segment is primarily dominated by
unorganized players. With the launch of brand
“JEET”, Cera attempts to create a strong foothold in
the same. Additionally, implementation of GST also
helped as it provides a level playing field across
organised and unorganised markets.

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DHD FUTURE OUTLOOK

• The company has been a preferred partner of CREDAI (Confederation of Real Estate Developers Associations of India), the apex
body of developers, for the last seven years. It also works closely with influencers and their associations like IIA (Indian Institute of
Architects), IIID (Institute of Indian Interior Designers) and IPA (Indian Plumbing Association).
• Continually innovating with “glazes” and development of “dual colour glazes” applied over sanitaryware products, is a focus area
of the company. The dual colours can be offered in multiple choices and the tone of the colours can also be customized as desired.
These along with anti-microbial glazes have potential to create new market space.
• With the introduction of new & cheaper raw materials from new sources and low reliance on import of raw materials, colours and
other inputs, the cost of production is expected to reduce further.
• The company expects higher growth in the coming times in its faucets business. With this in view, launching of new designs is
being done at regular intervals, in tune with the changing market needs.
• It made rapid strides in the tiles segment by launching the latest slabs and also new designs and sizes in both floor and wall
categories.
• The distribution of the company’s premium offering, Senator, has been widened to over 80 showrooms to reach more customers.

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 QUALITY EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 FINAL
ABOUTEDGE
THE MATRIX
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DHD
Edge Meter Aspects Grade
Growth 3
Profitability 4
Efficiency 3
Solvency 5
Valuation 3
Quality 3
TOTAL 21

The maximum grade for a company could be 30. Any company above grade 20
is worth considering. A grade below 15 is considered to be poor.
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DHD

THANK YOU
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equity involves individual judgements, this analysis should be used for only learning enhancements and cannot be considered to
be a recommendation on any stock or sector. Our knowledge team has limited understanding and we all are learning the art and
science behind this.

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DISCLOSURES
DHD
Neither Kredent Infoedge P Ltd. nor any of its associates have any financial interest in the subject company.
Neither Kredent Infoedge P Ltd. nor any of its associates have actual/beneficial ownership of one per cent or more securities of the subject company, at the end of
the month immediately preceding the date of publication of the research report or date of the public appearance.
Neither Kredent Infoedge P Ltd. nor any of its associates has, any other material conflict of interest at the time of publication of the research report or at the time
of public appearance.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation from the subject company in the past twelve months.
Neither Kredent Infoedge P Ltd. nor any of its associates have managed or co-managed public offering of securities for the subject company in the past twelve
months.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation for investment banking or merchant banking or brokerage services from
the subject company in the past twelve months.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation for products or services other than investment banking or merchant
banking or brokerage services from the subject company in the past twelve months.
Neither Kredent Infoedge P Ltd. nor any of its associates have received any compensation or other benefits from the subject Company or third party in connection
with the research report.
Neither Kredent Infoedge P Ltd. nor any of its associates was a client during twelve months preceding the date of distribution of the research report.
Neither Kredent Infoedge P Ltd. nor any of its associates has served as an officer, director or employee of the subject company.
Neither Kredent Infoedge P Ltd. nor any of its associates has been engaged in Market making for the subject company.
Kredent Infoedge P Ltd shall provide all other disclosures in research report and public appearance as specified by the Board under any other regulations.