Accumulate Cera Sanitaryware; target of Rs 7854 Prabhudas Lilladher

Prabhudas Lilladher's research report on Cera Sanitaryware

Cera Sanitaryware (CRS) reported soft results, though better than our estimates on account of improvement in the faucets business (up 20%+ YoY). Margin contraction continues with increase in revenue contribution from mid & entry level products and increase in RM prices. The company hiked prices by 6% in faucets and 1% for sanitaryware in Sep’24, which is likely to support margins in the coming quarters. CRS has also maintained its revenue guidance to reach Rs29bn by Mar’27 with high single digit growth in FY25, factoring in H1FY25 slowdown, and targets to maintain EBITDA margin at 16-17%. We believe the demand environment will improve by H2FY25 led by healthy growth in the real estate sector. We estimate revenue/ EBITDA/PAT CAGR of 11.9%/12.0%/12.4% over FY24-27E. Maintain ‘Accumulate’ rating.

Outlook

We downward revise FY25/FY26E earnings estimate by 4.7%/1.5% factoring in the margin contraction and subdued demand, and reduce TP to Rs7,854 (Rs9,190 earlier), based on 30x FY27E earnings.

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