Cera Q1 Review - Subpar Performance; Downgrade To Reduce Post Sharp Rally In Stock Price: ICICI Securities

ICICI Securities Report

In Q1 FY25, Cera Sanitaryware Ltd. consolidated revenue fell 6.5% YoY with sanitaryware/faucetware segments’ revenue dipping ~9%/5% YoY, while that of tiles plunging 20% YoY.

Operating profit margin shed 193 basis points YoY/281 bps QoQ due to negative operating leverage, resulting in Ebidta/adjusted profit after tax ebbing 17.5%/16.4% YoY.

Management flagged tepid demand in Q1 (exacerbated by India’s general elections/adverse weather); but, it expects demand to reinvigorate in H2 FY25 driven by a healthy real estate market. Cera maintains its revenue guidance of ~Rs 29 billion by March 27, but now expects growth to be back-ended with high single-digit FY25 revenue growth.

While we prune our FY25E/FY26E profit after tax by 4%/3%, we downgrade Cera to 'Reduce' (from Add), taking cognizance of the stock price’s six months ~31% rally. Rolling over to June 25E we arrive at a target price of Rs 8,637 (earlier Rs 7,827) set at 35 times price to earning June 26E (earlier 32 times).

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