Cera Sanitaryware - Performance Likely To Improve From H2, Upgrade To Neutral: Yes Securities

Yes Securities Report

Real-estate industry has witnessed strong launches and new constructions which should ideally lead to healthy demand for Cera Sanitaryware Ltd.'s products viz sanitaryware and faucets. Hence, we reckon Cera’s performance to improve from H2 FY25E.

Incrementally, we believe that growth should accelerate over FY26E-FY27E owing to strong tailwinds of real-estate industry.

We have maintained our revenue/Ebitda/PAT growth estimate of 9%/10%/8% respectively over FY24- FY26E. With healthy topline growth and focus on premiumization, we believe Cera will deliver operating margins of 16%/16.5% for FY25E/FY26E, respectively.

Notably, Cera has announced a buy-back of Rs1.3 billion (cash + current investment as on March’24 was Rs 8.14 billion) at a price of Rs 12,000/share.

At current market price, Cera trades at P/E(x) of 37.5x on FY26E EPS of Rs 220 (on FY27E EPS of Rs 244, stock trades at P/E(x) of 33.8 times).

We continue to value the company at P/E(x) of 40 times on FY26E EPS, maintaining our target price of Rs 8,809. Given the recent correction in stock prices, we upgrade our rating from Reduce to Neutral.

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