CMP: INR 7841.

00 June 17th, 2023

Cera Sanitaryware Ltd ISIN:
Overweight INE739E01017

INDEX DETAILS SYNOPSIS

Stock Data Cera Sanitaryware Ltd is engaged in the business of

manufacturing, selling and trading of various kinds
Sector Ceramics-Sanitary Ware of building products. It is positioned as the 2nd largest
BSE Code 532443 player in the organised domestic sanitaryware
industry with a market share of 25%.
Face Value 5.00
52wk.High/Low(Rs.) 8195.55/3950.05 The revenue from operations grew by 20.88% during
Volume (2WAvg. Qty) 1011 Q4FY23 to Rs.5325.34 Mn as compared to
Rs.4405.52 Mn in the corresponding quarter of
Market Cap (Rs. In Min) 101978.48 previous year.Net Profit increased by 18.49% to
Rs.627.53 Mn as compared to Rs.529.60 Mn in the
Annual Estimated Results (A* : Actual/E*: Estimated) Q4FY22.
Years (Rs.in Min) FY23A FY24E FY25E EBIDTA grew by 9.23% to Rs.995.94 Mn as
compared to Rs.911.81 Mn in the Q4FY22. EPS
Net Sales 18035.02 21642.03 26403.28 increased by 18.49% to Rs.48.25 as compared to
Rs.40.72 in the Q4FY22.
EBITDA 3285.41 3988.73 4872.90
Net Profit 2094.13 2604.72 3189.62 Net sales and PAT of the company are expected to
grow at a CAGR of 22% and 28% over 2023 to
EPS 161.01 200.27 245.25 20245E, respectively.
P/E 48.70 39.15 31.97 CERA will continue to benefit from its established
market position in the domestic sanitaryware
Shareholding Pattern (%) segment, diversified revenue, healthy operating
efficiency and strong financial risk profile over the
As on Dec 2022 As on Mar 2023 medium term.
Promoter 54.48 54.48
Due to the combination of internal factors,
FIIs 17.52 18.03 production throughput maximization, brand salience,
DIIs 9.37 9.73 and design differentiation, as well as the macros of
home improvement, CERA would be able to
Public 18.64 17.77 monetize all the growth drivers that present
themselves. CERA’s growth plan remains intact as it
1 Year Comparative Graph plans to expand capacities and monetize rising
demand.
\\\\\\\\\\\\\\
Demand for sanitaryware, faucetware and ceramic
tiles remains healthy with pick-up in real estate and
construction activity post pandemic induced
disruptions.
Increasing penetration of organised players and
capacity expansion plans of CERA coupled with
diversified product mix would help sustain healthy
revenue growth of 20-22% over the medium term.
“CERA” is well positioned, given by its established
market position, diversified product portfolio, strong
distribution and marketing network, and robust
Cera Sanitaryware Ltd BSE SENSEX balance sheet.
Document code: FR082022 Copyright © 2022 Firstcall Research. All Rights Reserved
PEERGROUP:

DIVIDEND
CMP MARKET CAP EPS(TTM) P/E(X)(TTM) P/BV(X) YIELD
COMPANY NAME
(Rs.) Rs. in mn. (Rs.) Ratio Ratio Ratio

Cera Sanitaryware Ltd 7841.00 101978.48 161.01 48.70 8.70 0.63

Kajaria Ceramics Ltd 1289.00 205210.00 21.64 58.60 8.83 0.85

Somany Ceramics Ltd 704.00 29900.00 16.83 43.70 3.81 0.42

Hindware Home Innovation Ltd 508.00 36760.00 7.96 63.80 6.38 0.10

QUARTERLY HIGHLIGHTS (CONSOLIDATED BASIS)

Resultsupdates-Q4FY23:

(Rs in millions) Mar-23 Mar-22 % Change

Revenue 5325.34 4405.52 20.88%

Net Profit 627.53 529.60 18.49%

EPS 48.25 40.72 18.49%

EBITDA 995.94 911.81 9.23%

The revenue from operations grew by 20.88% during Q4FY23 to Rs.5325.34 Mn as compared to Rs.4405.52 Mn in the
corresponding quarter of previous year. Net Profit increased by 18.49% to Rs.627.53 Mn as compared to Rs.529.60 Mn in the
Q4FY22.EBIDTA grew by 9.23% to Rs.995.94 Mn as compared to Rs.911.81 Mn in the Q4FY22. EPS increased by 18.49% to
Rs.48.25 as compared to Rs.40.72 in the Q4FY22.

Document code: FR082022 Copyright © 2022 Firstcall Research. All Rights Reserved
 Break up of Expenditure (Q4FY23 VS Q4FY22):

Value in Rs. Million

Break up of Expenditure
Q4FY23 Q4FY22 % Change

Cost of Materials Consumed 644.87 658.25 -2%

Changes in inventories 1689.91 1737.49 -3%

Employee Benefit Expenses 554.30 528.45 5%

Depreciation & Amortization Expenses 83.41 82.96 1%

Other Expenses 1419.04 973.51 46%

Break up of Expenditure (Q4FY23)

Cost of Materials Consumed

Purchase of Stock -in -trade

32% 15%

Employee Benefit Expenses

2%
13%
38% Depreciation & Amortization
Expenses

Other Expenses

COMPANY PROFILE

Cera Sanitaryware Ltd was incorporated as Madhusudan Oils and Fats Ltd (MOFL) in 1998. MOFL was later acquired by
Madhusudan Industries Limited under the scheme of arrangement in 2001 and subsequently its name was changed to CSL. It is
promoted by Mr Vikram Somany and has its manufacturing facility located at Kadi in Mehsana district of Gujarat. The company
is mainly engaged in the manufacturing of ceramic sanitaryware (installed capacity of 30,000 metric tonnes per annum
(MTPA)), faucet ware (installed capacity of 21 lakh pieces per annum (LPPA)) and trading of sanitaryware, faucet ware,
ceramic tiles, kitchen sinks and bath wellness products (i.e., shower room, steam shower room, shower cubicles and bath tubs).
Most of its goods (including traded goods) are sold under the ‘Cera’ brand. Furthermore, CSL has wind-mills and solar solar
power plant with installed power generation capacity aggregating 10.325 MW for meeting its captive power requirement.

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 - Actual, E* -Estimations&Rs.InMillions)

Balance Sheet as of March 31,2022-2025E FY-22A FY-23A FY-24E FY-25E

FINANCIALHIGHLIGHT(CONSOLIDATED BASIS) Rs. In
Rs.In Millions Rs.In Millions Rs.InMillions
Millions
ASSETS
Non-Current Assets
a)Property ,Plant and Equipment 3206.71 3138.31 3169.70 3201.39
b)Capital Work in Progress 6.85 169.35 203.22 223.54
c) Right-of-use assets 158.28 250.78 300.93 346.07
d) Other Intangible Assets/Investments in Property 4.64 5.50 5.98 6.58
e)Financial Assets
i) Investments 348.14 282.60 285.43 302.55
ii)Others Financial Assets 16.46 82.07 102.59 113.06
f)Other Non-Current Assets 58.29 99.01 123.76 136.14
1.Sub-TotalNon-Currentassets 3799.36 4027.62 4191.61 4329.33
Current Assets
a)Inventories 2937.49 3825.25 5384.97 6790.01
b)Financial assets
i) Investments 5271.56 6345.18 7296.96 8756.35
ii)Trade Receivables 1647.68 1891.51 2080.67 2455.19
iii)Cash and Cash Equivalents 138.96 112.89 114.01 115.16
iv)Derivative instruments 0.00 0.00 0.00 0.00
v)Bank balances other than cash 103.61 149.01 178.81 196.69
vi)Loans 0.00 0.00 0.00 0.00
vii)Other Financial Assets 47.73 39.95 40.35 40.75
c)Current Tax Assets 1273.30 0.00 0.00 0.00
d)Other Current Assets 297.64 375.03 412.53 453.78
2.Sub-Totalcurrentassets 11717.96 12738.82 15508.30 18807.92
Total Assets(1+2) 15517.32 16766.44 19699.91 23137.26
EQUITYANDLIABILITIES
EQUITY
a)Equity Share Capital 65.03 65.03 65.03 65.03
b)Other Equity 10228.81 11767.47 14266.07 17455.68
1.TotalEquity 10293.84 11832.50 14331.10 17520.71
Liabilities
Non Current Liabilities
a)Financial liabilities
i)Borrowings 55.44 41.68 30.00 25.00
ii)Lease liabilities 120.02 202.85 263.70 290.07
iii)Deferred Tax/Other Financial &noncurrent Liabilities 625.559 665.546 672.20 705.81
d)Provisions 89.94 89.17 89.17 97.19
2.SubTotal-NonCurrentliabilities 890.96 999.24 1055.07 1118.08
Current Liabilities
a)Financial liabilities
i)Borrowings/Lease liabilities 276.64 286.40 259.00 234.78
ii)Trade payables 1892.82 2069.33 2193.49 2237.36
iv)Other Financial Liabilities 832.14 1097.35 1349.94 1484.93
b)Provisions 24.29 130.87 157.04 180.60
c)Other Current Liabilities 301.71 295.27 298.22 304.19
d)Income Tax Liabilities/&Assets-Held for sale 1004.92 55.49 56.04 56.60
3.SubTotalcurrentliabilities 4332.51 3934.70 4313.74 4498.47
Total Equity and Liabilities(1+2+3) 15517.32 16766.44 19699.91 23137.26

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 Annual Profit & Loss Statement (Consolidated) for the period of 2022to 2025E

Value(Rs.in.mn) FY22A FY23A FY24E FY25E

Description 12m 12m 12m 12m

Net Sales 14458.30 18035.02 21642.03 26403.28

Other Income 236.46 355.70 387.50 410.75

Total Income 14694.76 18390.73 22029.53 26814.03

Expenditure -12170.96 -15105.32 -18040.80 -21941.12

Operating Profit 2523.80 3285.41 3988.73 4872.90

Interest -52.82 -60.48 -67.57 -71.47

Gross profit 2470.98 3224.93 3921.16 4801.43

Depreciation -324.07 -326.07 -391.72 -477.90

Exceptional Items -57.38 -50.00 0.00 0.00

Profit Before Tax 2089.53 2848.86 3529.44 4323.54

Tax -560.08 -738.34 -910.60 -1119.80

Profit After Tax 1529.45 2110.52 2618.85 3203.74

Extraordinary Items 0.00 0.00 0.00 0.00

Minority Interest -18.57 -16.46 -14.21 -14.20

Share of Profit & Loss of Asso 0.08 0.08 0.08 0.08

Net Profit 1510.96 2094.13 2604.72 3189.62

Equity capital 65.03 65.03 65.03 65.03

Reserves 10086.49 11661.35 14266.07 17455.68

Face value(Rs) 5.00 5.00 5.00 5.00

EPS(Rs) 116.18 161.01 200.27 245.25

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 Quarterly Profit & Loss Statement (Consolidated) for the period of 30thSep, 2022 to 30th June, 2023E

Value(Rs.in.mn) 30-Sep-22 31-Dec-22 31-Mar-23 30-June-23E

Description 3m 3m 3m 3m

Net sales 4159.40 4578.25 5325.34 5538.36

Other income 105.72 132.40 123.86 128.81

Total Income 4265.12 4710.64 5449.20 5667.17

Expenditure -3480.20 -3828.15 -4453.26 -4630.62

Operating profit 784.92 882.49 995.94 1036.55

Interest -14.03 -14.35 -21.11 -20.60

Gross profit 770.89 868.14 974.83 1015.95

Depreciation -82.40 -85.17 -83.41 -93.10

Exceptional Items 0.00 0.00 -50.00 0.00

Profit Before Tax 688.49 782.97 841.42 922.85

Tax -177.12 -214.09 -209.82 -238.10

Profit After Tax 511.37 568.88 631.61 684.75

Extraordinary Items 0.00 0.00 0.00 0.00

Minority Interest -3.88 -4.74 -4.08 -3.86

Share of Profit & Loss of Ass. 0.00 0.00 0.00 0.00

Net Profit 507.49 564.15 627.53 680.89

Equity capital 65.03 65.03 65.03 65.03

Face value(Rs) 5.00 5.00 5.00 5.00

EPS(Rs) 39.02 43.38 48.25 52.35

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 Ratio Analysis:

Particulars FY22A FY23A FY24E FY25E

EPS (Rs.) 116.18 161.01 200.27 245.25

EBITDA Margin (%) 15.82% 16.24% 18.43% 18.46%

PBT Margin (%) 14.45% 15.80% 16.31% 16.37%

PAT Margin (%) 10.58% 11.70% 12.10% 12.13%

P/E Ratio(x) 67.49 48.70 39.15 31.97

ROE (%) 15% 18% 18% 18%

ROCE (%) 21% 25% 25% 25%

Debt Equity Ratio 0.03 0.02 0.02 0.01

EV/EBITDA (x) 38.37 29.15 23.77 19.15

Book Value(Rs.) 780.54 901.63 1101.90 1347.15

P/BV 10.05 8.70 7.12 5.82

Document code: FR082022 Copyright © 2022 Firstcall Research. All Rights Reserved
Charts:

30000.00
NET SALES & PAT P/E RATIO
80.00
25000.00 70.00
60.00
20000.00
(Value in (Rs.mn)

50.00
15000.00 40.00

P/E (x)
30.00
10000.00
20.00
5000.00 10.00
0.00 0.00
FY22A FY23A FY24E FY25E FY22A FY23A FY24E FY25E
Netsales 14458.30 18035.02 21642.03 26403.28 P/E (x) 67.49 48.70 39.15 31.97
PAT 1529.45 2110.52 2618.85 3203.74
Years

DEBT /EQUITY RATIO EV/EBITDA (x)

0.03 45.00
40.00
0.03 35.00
0.03 0.02
0.02 30.00
0.02 25.00
Multiples

0.02 20.00
0.01 0.01 15.00
10.00
0.01 5.00
0.00 0.00
FY2 FY2 FY2 FY2
FY22A FY23A FY24E FY25E 2A 3A 4E 5E
EV/EBITDA (x) 38.37 29.15 23.77 19.15
Years Years

P/BV(X)
12.00
10.00
8.00
6.00
4.00
2.00
0.00
FY22A FY23A FY24E FY25E
P/BV 10.05 8.70 7.12 5.82

Years

Document code: FR082022 Copyright © 2022 Firstcall Research. All Rights Reserved
OUTLOOKANDCONCLUSION

▪ At the current market price of Rs.7841.00, the stock P/E ratio is at 39.15 x FY24E and 31.97x FY25E respectively.

▪ Earnings per share (EPS) for FY24E and FY25E are expected at Rs.200.27 and Rs.245.25 respectively.

▪ Net sales and PAT of the company are expected to grow at a CAGR of 22% and 28% over 2023 to 2025E, respectively.

▪ On the basis of EV/EBITDA, the stock trades at 23.77 x for FY24E and 19.15 x for FY25E.

▪ Price to Book Value of the stock is expected to be at 7.12 x and 5.82 x for FY24E and FY25E respectively.

CERA has established presence in the sanitaryware industry through its ‘CERA’ brand and is positioned as the second-largest
player in the organized domestic sanitaryware industry; its growth has been aided by its strong marketing and distribution
setup.The company is leveraging its strong market position in the domestic sanitaryware industry by venturing into related
business segments, such as faucets, tiles and wellness and allied products, thus becoming a complete bathroom solutions
provider. Successful diversification into related businesses has helped lower dependence on the sanitaryware business. Due to
the combination of internal factors, production throughput maximisation, brand salience, and design differentiation, as well as
the macros of home improvement, CERA would be able to monetize all the growth drivers that present themselves. Its growth
plan remains intact as it plans to expand capacities and monetize rising demand.

The demand for home improvement, especially bathroom renovations and remodelling, is contributing to the significant increase
in the sales of building products.Demand for sanitaryware, faucetware and ceramic tiles remains healthy with pick-up in real
estate and construction activity post pandemic induced disruptions. Furthermore, increasing penetration of organised players and
capacity expansion plans of Cera coupled with diversified product mix would help sustain healthy revenue growth of 20-22%
over the medium term. Even as the low cost structure, manufacturing efficiencies and ability to pass on input price hikes should
keep operating margin at about 17%.CERA will continue to benefit from its established market position in the domestic
sanitaryware segment, diversified revenue, healthy operating efficiency and strong financial risk profile over the medium term.

“CERA” is well positioned, given by its established market position, diversified product portfolio, strong distribution and
marketing network, and robust balance sheet. Hence; we say that, we are Overweight in this particular scrip for Medium term
investment.

Document code: FR082022 Copyright © 2022 Firstcall Research. All Rights Reserved
INDUSTRY OVERVIEW& OUTLOOK:

Building Products
Sanitaryware:

The Indian sanitaryware market was estimated to be Rs.5,500 crore in 2021. It is the second-largest sanitaryware market in the
world and is projected to grow an at accelerated rate over the next few years, driven by continued public and private initiatives in
sanitation. These, along with macro factors such as rising population, urbanisation and a favourable demography, will create
greater impetus for proper sanitation facilities. Resurgent real estate creates a strong demand for sanitaryware as well.
The growth of the Indian ceramic sanitaryware market is driven by improving living standards, increasing income levels, and the
growing awareness of sanitation and hygiene among people. These factors are getting consumers to spend more on sanitary
products. Growing incomes and exposure to global trends in today’s connected world, thanks to greater internet penetration, are
driving consumers’ preference for premium and luxury offerings in the range of ceramic fittings. Conscious choices to follow a
healthy lifestyle, the shift from unbranded to branded products, strong replacement demand, and evolving tastes are propelling
the market for sanitaryware products. The demand is expected to grow substantially with the rise of investment in commercial
spaces and projects such as airports, hospitals, hotels and residential projects. The growing demand for expensive, high-end
sanitaryware products from the luxury housing segment and star hotels will also add to the revenue generated by this segment.

Faucets:

The Indian faucet industry was estimated to be valued at Rs.11,000 crore in 2021. The industry is dominated by unorganised
players, but there is a declining trend over the past few years due to growing brand awareness and an increasing preference for
quality products. Within this segment, the bathroom category is the most dominant, with the residential segment accounting for
most of the demand. The demand for faucets is expected to increase exponentially in the foreseeable future due to several factors
including favourable government policies, rapid urbanisation and nuclearisation, improving lifestyles and higher disposable
incomes.

Tiles:

India is the second-largest producer of ceramic tiles and the secondlargest consumer of ceramic tiles in the world after China
with an estimated production of 750 million sq m, or ~6% of the global market. The premium tiles market in the country is worth
Rs.11,500 crore. The industry is largely dominated by ceramic and polished vitrified and glazed vitrified tiles.

Document code: FR082022 Copyright © 2022 Firstcall Research. All Rights Reserved
Plastic Pipes and Fittings:

India’s plastic pipes market is estimated at Rs.33,000 crore. The industry has posted a CAGR of 10% over the last five years
(the highest growth rate in the building materials space). The industry’s products are made from resins such as polyvinyl
chloride (PVC), chlorinated polyvinyl chloride (CPVC), PPE, and high-density polyethylene (HDPE), with diverse applications
across agriculture, plumbing, and infrastructure sectors. The market is projected to grow at a CAGR of 11-12% between 2021-
25, to reach a market value of Rs.55,000-60,000 crore by FY 2024-25, given the government’s focus on improving irrigation and
infrastructure facilities, strengthening water supply and sanitation infrastructure, and affordable housing in urban and rural areas.
In addition to this, newer applications for PVC pipes are also projected to drive demand in the future. Organised players will
need to enhance their production capacity as they will gain from following the Central government’s directive to manufacture
pipes as per norms laid down by the Bureau of Indian Standards (erstwhile Indian Standard Institute (ISI) in April 2022. This
will help organised players gain market share from unorganised players.

Growth Drivers:

Favourable Demography:

The ever-improving lifestyle and living standards of millennials are projected to drive the demand for premium building
products.

Revival of Real Estate Demand:

Post-pandemic, the real estate demand in India is witnessing a revival backed by rising incomes and the lowest-ever mortgage
rates seen in years.

Renovation:

The demand for home improvement, especially bathroom renovations and remodelling, is contributing to the significant increase
in the sales of building products. Pandemic-influenced need for improvements such as creation of multifunctional space, home
bars and outdoor entertaining areas are also now more popular than ever.

Document code: FR082022 Copyright © 2022 Firstcall Research. All Rights Reserved
Increasing Urbanisation:

The urbanisation rate in India is projected to increase to 40% by 2030. The demand for building products has been rising in
urban locales with the constant migration of people in search of a better life and livelihood. Growing incomes in rural areas have
also been generating demand for home improvement and replacement.

Technological Advancements:

The emergence of nanotechnology has revolutionised the sanitaryware industry by increasing the shelf life of building materials
and making them dirt and bacteria resistant. These products are gaining substantial traction across clinics, hospitals, laboratories,
and food processing plants, where hygiene is critical.

Favourable Government Policies:

The Government of India has allocated Rs.60,000 crore for the ‘Nal Se Jal’ scheme to ensure the availability of freshwater
across the country. This is expected to boost the demand for pipes and fittings across the country.

Per Capita Consumption:

The per capita consumption of tiles in 2018 was a mere 0.59 sq m in India, compared to 3.95 sq m in China and 3.39 sq m in
Brazil, and the global average of 1.40 sq m, indicating a huge headroom for growth.

Shopping Malls:

India is expected to see >65 million sq ft of new mall spaces by the end of 2022. Of this, the top seven cities will make up 72%,
and the remaining 28% or 18.2 million sq ft is slated to come up in Tier 2-3 cities. This could widen the ceramic tile and
sanitaryware market soon.

Document code: FR082022 Copyright © 2022 Firstcall Research. All Rights Reserved
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Sectors Covered
Name of the Analyst Qualifications Under Coverage in the Current Report
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Analyst Stock Weights

Overweight (O): The stock's total return is expected to exceed the average total return of the analyst's industry (or industry
team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

Equal-weight (E): The stock's total return is expected to be in line with the average total return of the analyst's industry (or
industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

No-weight(NR): Currently the analyst does not have adequate conviction about the stock's total return relative to the
average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next
12-18 months.

Underweight (U): The stock's total return is expected to be below the average total return of the analyst's industry (or
industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

Unless otherwise specified, the weight included in Firstcall Research does not indicate any price targets. The statistical
summaries of Firstcall Research will only indicate the direction of the industry perception of the analyst and the
interpretations of analysts should be seen as statistical summaries of financial data of the companies with perceived
industry direction in terms of weights.

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