April 17, 2025
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Research Report on Cera Sanitaryware by ICICI Securities
Analysis dated April 2025
Sector: Sanitaryware
Price on Analysis date: Rs. 5660
Target Rs. 7902
(40% Upside potential)
Target Period: 12 Months
Research Report
We recently interacted with management of Cera Sanitaryware (CRS).
Takeaways:
1) Demand scenario has remained sluggish; while the project segment continues to see healthy traction, retail yet remains slow. Management expects low-single-digit YoY revenue growth for FY25 and is hopeful of better growth in FY26, as many of the earlier-launched projects are expected to see completion.
2) Management believes their operating margins would be in the range of ~16–17% going ahead as demand improves and the complete effect of price increases is passed on to the market. Also, the focus on premium products that have better margins should aid profitability ahead. Maintain estimates and BUY with an unchanged Dec’25E TP of INR 7,902.
Demand trends remain tepid
As per our interaction with management, demand trends are yet sluggish. Demand from the projects segment remains healthy; however, the retail segment is yet to pick up. Management expects low-single-digit growth in FY25 and is hopeful of a better FY26 driven by the completion of many projects that were launched earlier. Contribution of the projects business may rise a marginal 1–3% in FY25 (from ~35% in FY24); CRS does not expect any strain on its balance sheet, as these sales are routed through dealers, and thus, credit terms are tightly followed.
CRS is focusing on increasing its presence in the luxury segment through its three major brands: LUXE, SENATOR and LUSTRE. It has tied-up with influencers in major markets to penetrate this segment and would launch more SKUs and targets to derive ~10% of revenue from this segment by FY27.
CRS plans to open 55–60 stores of Senator and 100 stores of LUXE by FY26.
Management maintains its FY27 revenue target of ~INR 29bn. We model a revenue CAGR of 9.2% over FY24–27E.
Margins to improve to ~16–17%
CRS management believes it can achieve ~16–17% OPM going ahead as demand improves and it can pass on the complete price hike (~6% taken in Sept’24) in faucetware (~3% done TD). Also, improved contribution from luxury segment should aid margins going ahead.
We have modelled OPM of 14.5–15.8% over FY25–27E (vs. avg. OPM of ~15.2% over FY12–24).
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