StockAxis

Cera Sanitaryware Ltd

Quarterly Result - Q1FY23

Cera Sanitaryware Ltd

Ceramics / Marble / Granite / Sanitaryware

Current

CMP
Rs. 4754
Rating:
Hold
August 04, 2022

Previous

Rating:
Hold

Stock Info

BSE
532443
NSE
CERA
Bloomberg
CRS:IN
Reuters
CERA.NS
Sector
Ceramics / Marble / Granite / Sanitaryware
Face Value (Rs)
5
Equity Capital (Rs cr)
6
Mkt Cap (Rs cr)
6360.20
52w H/L (Rs)
6450.00 - 3515.00
Avg Daily Vol (BSE+NSE)
6,007

Shareholding Pattern

(as on 30-Jun)
%
Promoter
54.48
FIIs
18.34
DIIs
10.60
Public & Others
16.58
Source: Ace equity, StockAxis Research

Price performance

Return (%)
1m
3m
12m
Absolute
14.68
14.70
2.23
Sensex
9.51
4.72
7.23
Source: Ace equity, StockAxis Research

Indexed Stock Performance

Cera Sanitaryware Ltd Sensex
Cera Sanitaryware Ltd
Source: Ace equity, StockAxis Research

Quarterly Result Highlights

CRS’s consolidated Q1FY23 revenue increased 78% YoY (-9.8% Q-o-Q) to Rs 397 Cr owing to strong demand from home upgrades, real estate launches and price hikes of 3% in sanitaryware and 5% in faucetware by CRS during mid-May. Consolidated gross margin declined 550bps YoY to 53.5%. However, a higher revenue contribution of sanitaryware and faucetware at 89% in Q1FY23 vs. 81% in Q1FY22 had a positive bearing on operating margin. This coupled with price hike benefits and lower employee & other expenses spurred EBITDA margin gains of 670bps YoY (-360bps Q-o-Q) to 15.8%. While the company reported net profit of Rs39.8 Cr, up by 199.1% YoY.

Conference call Highlights

  • In Q1FY23 capacity utilisation for Sanitaryware was 109.5% & Faucetware was 102.7%, expects to maintain it in FY23. In Faucetware the company produced 3 lac pieces which is all time high.
  • Sanitaryware contributed 54%, Faucetware contributed 35%, Tiles contributed 10% & Others contributed 1%. B2C is 68% of sales. The new products contributed 22% to topline.
  • Tier I sales were 30% in Q1FY23, Tier II sales were 13% in Q1FY23, Tier III sales 56% in Q1FY23 and Exports sales were 1% in Q1FY23.
  • Entry/Mid/Premium Breakup: In Sanitaryware Entry products were 46.7%, Mid products were 43.1% and Premium products were 10.2% in Q1FY23 in Faucetware Entry products were 51.7%, Mid products were 30.4% and Premium products were 17.9% in Q1FY23.
  • In May-22, 3% hike was taken in Sanitaryware and 5% hike was taken in Faucetware.
  • The company did not see material impact of raw material cost.
  • It stated China clay, feldspar and POP are 95% of Sanitaryware raw material mix and had combined impact of 2%.
  • Gail supplied 49% of gas requirement and Sabarmati supplied 51% needs of gas to the plant. Transportation price increased to 2-3% and cost of corrugated boxes grew by 6%.
  • In Faucetware 1st Phase of expansion is to increase capacity from 2.7lakhs SKUs per month to 4 lakhs SKUs per month at the cost of Rs 69 Cr, the expansion is expected to commence by Q1FY24.
  • In Sanitaryware it is setting up new Greenfield plant which will be in 100Km range of the current manufacturing plant, the company stated few land parcels have been shortlisted. The cost would be Rs 129 Cr and the project would be completed in 24 months.
  • Both the projects would be funded through internal accruals. The CAPEX excluding above mentioned projects for FY23 are Rs 24.7 Cr.
  • The company launched retail engagement and loyalty program +11,500 retailers have adopted the platform in 3 months & 40% retailers are regular users of the app. This will provide insights to the company to cross sell and upsell.
  • The management guided 50-75bps increase in EBITDA margins annually. In next 3.5 years it expects to double revenue.

Outlook & valuation

The building material companies are riding high on strong demand in the domestic market. We like Cera given its healthy market share in domestic sanitaryware and faucets industry, extensive distribution reach, healthy balance sheet and pedigree of management. The stock is currently trading at the PE of 22.5x on the basis of FY25E earnings.

Quarterly Financials

Particulars (Rs. in Crores) Q1FY23 Q1FY22 Y-o-Y Q4FY22 QoQ FY22 FY21 YoY
Revenue from Operations 397.00 223.00 78.00% 441.00 -10.00% 1446.00 1224.00 18.00%
Employee Benefit Expenses 50.00 44.00 53.00 194.00 154.00
Other Expenses 285.00 158.00 303.00 1023.00 913.00
Total operating expenses 334.00 202.00 356.00 1217.00 1066.00
EBITDA 63.00 21.00 197.00% 85.00 -26.00% 229.00 158.00 45.00%
EBITDA Margin (%) 15.80% 9.50% 19.20% 15.80% 12.90%
Depreciation and Amortization 8.00 8.00 8.00 32.00 40.00
EBIT 55.00 13.00 312.00% 76.00 -28.00% 196.00 118.00 66.00%
Other Income -1.00 6.00 6.00 24.00 25.00
Finance Cost 1.00 1.00 2.00 5.00 10.00
Profit Before Exceptional Items and Tax 54.00 18.00 81.00 215.00 134.00
Exceptional Items - -6.00 -6.00
Profit Before Tax 53.60 18.10 196.00% 75.00 -29.00% 209.00 134.00 56.00%
Tax Expenses 13.70 4.60 22.00 56.00 34.00
Effective Tax Rate (%) 25.60% 25.50% 29.30% 26.80% 25.40%
Profit After Tax 39.90 13.50 196.00% 53.00 -25.00% 153.00 100.00 53.00%
PAT Margin (%) 10.00% 6.00% 12.10% 10.60% 8.20%
EPS 30.40 10.20 199.00% 40.70 -25.00% 116.00 77.00 50.00%

Source: Company Filings; StockAxis Research

Consolidated Financial statements

Profit & Loss statement

Yr End March (Rs Cr) 2019 2020 2021 2022 2023E 2024E 2025E
Net Sales 1351.50 1223.70 1224.30 1445.80 1705.00 2049.00 2365.00
Expenditure
Material Cost 606.20 550.30 626.80 683.90 826.90 1004.00 1151.80
Employee Cost 165.50 170.70 153.70 189.40 208.00 250.00 288.50
Other Expenses 381.70 337.20 285.80 344.10 392.20 454.90 525.00
EBITDA 198.30 165.50 158.10 228.40 277.90 340.10 399.70
EBITDA Margin 14.70% 13.50% 12.90% 15.80% 16.30% 16.60% 17.00%
Depreciation & Amortization 28.00 38.80 39.60 32.40 40.00 48.00 53.00
EBIT 170.30 126.70 118.50 196.00 237.90 292.10 346.70
EBIT Margin % 12.60% 10.40% 9.70% 13.60% 14.00% 14.30% 14.70%
Other Income 18.60 18.20 25.20 23.60 25.00 25.00 26.00
Interest & Finance Charges 8.50 10.10 9.70 5.30 6.90 6.60 6.00
Profit Before Tax - Before Exceptional 180.30 134.90 133.90 214.40 256.00 310.50 366.70
Profit Before Tax 180.30 134.90 133.90 214.40 256.00 310.50 367.70
Tax Expense 65.20 24.30 34.00 56.00 64.50 78.20 92.40
Effective Tax rate 36.20% 18.00% 25.40% 26.10% 25.20% 25.20% 25.00%
Net Profit 115.10 110.50 99.90 158.40 191.50 232.40 275.30
Net Profit Margin 8.50% 9.00% 8.20% 11.00% 11.20% 11.30% 12.00%

Balance Sheet

Yr End March (Rs Cr) 2019 2020 2021 2022 2023E 2024E 2025E
Share Capital 6.50 6.50 6.50 6.50 6.50 6.50 6.50
Total Reserves 694.40 764.20 865.20 1008.60 1180.60 1396.70 1652.80
Shareholders' Funds 711.20 778.40 883.50 1029.40 1196.10 1412.20 1669.30
Minority Interest 10.30 7.70 11.70 14.20 9.00 9.00 10.00
Non Current Liabilities
Long Term Burrowing 39.60 43.40 42.60 17.50 72.00 62.00 54.00
Deferred Tax Assets / Liabilities 43.60 29.90 30.30 35.40 35.40 35.40 35.40
Long Term Provisions 6.70 10.60 10.30 9.00 9.00 9.00 9.00
Current Liabilities
Short Term Borrowings 44.70 41.00 30.30 27.70 27.70 27.70 27.70
Trade Payables 110.90 95.30 155.40 133.50 146.80 185.10 199.50
Other Current Liabilities 194.90 177.30 180.00 269.20 269.20 269.20 269.20
Short Term Provisions 16.60 2.90 6.90 2.40 2.40 2.40 2.40
Total Equity & Liabilities 1190.80 1219.40 1377.70 1551.20 1785.60 2030.10 2293.60
Assets -
Net Block 385.30 438.50 415.50 451.50 541.50 563.50 570.50
Non Current Investments 20.80 38.80 40.20 35.00 35.00 35.00 35.00
Long Term Loans & Advances 16.80 10.70 9.40 11.00 11.00 11.00 11.00
Current Assets
Currents Investments 157.00 189.50 434.00 527.20 557.20 557.20 557.20
Inventories 215.80 243.00 199.70 293.70 267.60 401.10 380.90
Sundry Debtors 298.40 222.80 209.50 164.80 302.10 262.30 387.00
Cash and Bank 11.00 2.10 10.40 14.90 18.20 147.00 300.00
Short Term Loans and Advances 34.70 35.10 15.10 15.10 15.10 15.10 15.10
Total Assets 1190.80 1219.40 1377.70 1551.10 1785.60 2030.00 2294.50

Cash Flow Statement

Yr End March (Rs Cr) 2019 2020 2021 2022 2023E 2024E 2025E
Profit After Tax 115.10 110.50 99.90 158.40 191.50 232.40 275.30
Depreciation 28.00 38.80 39.60 32.40 40.00 48.00 53.00
Changes in Working Capital -21.40 4.70 131.60 -71.30 -97.90 -55.30 -89.10
Cash From Operating Activities 124.40 129.00 268.00 119.50 133.50 225.10 240.20
Purchase of Fixed Assets -57.50 -46.30 -14.70 -46.80 -130.00 -70.00 -60.00
Free Cash Flows 66.90 82.70 253.30 72.70 3.50 155.10 180.20
Cash Flow from Investing Activities -110.40 -79.70 -242.30 -66.80 -160.00 -70.00 -60.00
Increase / (Decrease) in Loan Funds -5.60 1.30 -8.30 14.90 1.00 -10.00 -9.00
Equity Dividend Paid -15.60 -33.80 - -19.50 -19.50 -16.30 -19.20
Cash from Financing Activities -29.00 -55.20 -18.80 -4.60 30.50 -26.30 -27.20
Net Cash Inflow / Outflow -15.00 -5.80 6.80 48.10 4.00 128.80 153.00
Opening Cash & Cash Equivalents 21.70 6.70 0.80 7.70 14.10 18.10 147.00
Closing Cash & Cash Equivalent 6.70 0.80 7.70 14.10 18.10 147.00 300.00

Key Ratios

Yr End March 2019 2020 2021 2022 2023E 2024E 2025E
Basic EPS 88.50 87.10 77.50 121.80 147.20 178.70 211.70
Diluted EPS 88.50 87.10 77.50 121.80 147.20 178.70 211.70
Cash EPS (Rs) 110.00 116.90 107.90 142.30 178.00 215.60 251.70
DPS 13.00 13.00 13.00 15.00 15.00 12.50 14.80
Book value (Rs/share) 546.90 598.50 679.30 791.50 919.70 1085.80 1283.50
ROCE (%) Post Tax 16.10% 14.30% 11.80% 16.00% 16.60% 17.00% 19.00%
ROE (%) 16.20% 14.50% 11.40% 15.40% 16.00% 17.80% 18.00%
Inventory Days 55.00 68.00 66.00 62.00 60.00 60.00 60.00
Receivable Days 76.00 78.00 64.00 47.00 50.00 50.00 50.00
Payable Days 28.00 31.00 37.00 36.00 30.00 30.00 30.00
PE 34.90 26.50 50.40 36.90 32.30 26.60 22.50
P/BV 5.60 3.90 5.80 5.70 5.20 4.40 3.70
EV/EBITDA 19.90 17.60 29.90 23.40 22.50 16.40 15.50
Dividend Yield (%) 0.40% 0.60% 0.30% 0.30% 0.30% 0.30% 0.30%
P/Sales 3.00 2.50 4.20 4.00 3.60 3.00 0.00%
Net debt/Equity - - - - 0.10 - -
Net Debt/ EBITDA -0.40 -0.60 -2.30 -2.20 0.30 -1.80 -
Sales/Net FA (x) 3.60 3.00 2.90 3.30 3.40 3.70 4.20