Cera Sanitaryware - Demand Environment Steady: ICICI Securities

ICICI Securities Report

Our optimism on Cera Sanitaryware Ltd. is driven by the sustained healthy demand environment aided by pick-up in the residential housing market as well as in home improvement market.

Our interaction with dealers and industry participants indicates continued demand tailwinds even in Q3 FY23E-to-date in the segments of sanitaryware and faucetware (except in national capital region region, where construction has been banned since November 2022 to combat pollution).

Cera’s operating margin for FY23E should be ~16% as there are no additional cost pressures, though high advertising and promotion spend on the new brand campaign launched in H2 FY23, if accounted for entirely in H2 itself, may result in lower margins.

Management had earlier guided for doubling of revenue over next ~3.5 years with margin improvement of at least 50 basis points-75 bps YoY in FY23.

We expect Cera to witness revenue/profit after tax compound annual growth rates of 16.6%/24.4% respectively, over FY22-FY25E led by faucetware and sanitaryware segments with strong return ratios.

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