Tiles, Sanitaryware - Near-Term Demand Scenario To Remain Muted, To Improve From CY25E: ICICI Securities

ICICI Securities Report

Ceramic and bathware companies had tepid Q1 FY25 earnings as demand environment was subdued (partly impacted by general elections and adverse weather conditions). Kajaria Ceramics reported modest tile volume growth of 7.9% YoY, while Somany Ceramics’ volume declined 0.9% YoY.

In bathware segment, Cera Sanitaryware’s revenue declined 5.2% YoY whereas Kajaria Ceramics/Somany reported revenue growth of 8.7%/4.6% YoY (on low base) in Q1. Operating margin declined 90 basis points YoY for Kajaria Ceramics (due to higher employee expenses) and 16 bps YoY for Somany Ceramics (due to negative operating leverage) despite stable raw material prices.

Operating profit margin for Cera also fell 193 bps YoY on negative operating leverage. We expect healthy housing market to drive growth for tiles and bathware companies from CY25 as many real estate projects launched CY21 onwards will get completed.

Operating profit margin, too, may improve driven by operating leverage and benign raw material prices. We have Buy on Somany Ceramics, Hold on Kajaria Ceramics and Reduce on Cera.

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