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Yes Securities Report
Though Cera Sanitaryware Ltd.'s revenue in Q2 FY25 was above our estimates, H1 FY25's topline remained flattish on YoY basis. Hence, we have largely maintained our revenue growth estimate for FY25 but owing to contraction in operating margins during H1 FY25, we have revised our Ebitda margins downwards from 16%/16.5% to 14.8%/15.5% in FY25E/FY26E respectively.
However, owing to lower tax rates in H1 FY25, our EPS estimate has been downgraded by a mere 1%/3% for FY25E/FY26E respectively. Going ahead, we reckon demand for Sanitaryware and faucets to improve from hereon with expected pick-up in demand from retail segment along with higher demand from project business.
Hence, we expect revenue/Ebitda/PAT growth of 11%/9%/8% respectively over FY24-FY27E. Notably, company revenue/Ebitda/PAT grew by 14%/15%/26% over FY22-FY24.
At current market price, the stock trades at P/E(x) of 32x/29x on FY26E/FY27E EPS of Rs 214/Rs235 respectively. We have re-valued the company at P/E(x) of 35x on FY27E EPS, owing to slower growth versus past two-years, arriving at a target price of Rs 8,224. Hence, we upgrade the stock to Buy.
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