But after better than expected Q4, domestic brokerage firm Yes Securities has started coverage.
একটি 30 per cent higher than the current level, with a BUY recommendation and a target of Rs 5,132 Brokerage believes that the growth moment of the smallcap company is likely to continue.
Trends in renovations and home improvement have also begun to grow rapidly and moving forward, the real estate industry may continue to move northward after the recession in FY15-FY20, so, demand for sanitaryware products is expected to remain strong.
Shares of the company rose more than 2 percent in intraday trading but fell nearly 19 percent on a YTD basis.
According to the brokerage, Cera leads a strong 15 percent market share of the organized market. As one of the leaders in the sanitaryware industry in India, the company offers a wide range of products (sanitaryware and faucets) which account for about 86 per cent of total revenue. It also offers a high-end array of wall and floor tiles (12 percent of business).
In FY22, Cera registered a high EBITDA margin of 15.8 percent, and going forward, the company is increasing its contribution to high-value products. Net profit for the quarter stood at Rs 527 million, a 10.4 per cent YoY and 17.6 per cent QoQ increase.
Yes Securities further believes that ceramic manufacturers’ revenue could grow at a CAGR of 17%, due to strong demand, and expects the segment (53% of revenue) to grow at a CAGR of 15% in FY22-FY24E. The call (34 percent of Biz) is expected to witness a CAGR of 16 percent over the same period. The other two categories – tiles and wellness, which make up 14 percent of revenue, will have a 25 percent CAGR increase over FY22-FY24E.
A buy call came from the stock
With a healthy demand outlook after Q4 performance of Capital and BOBCAPS.
Yes Securities said, “We expect CERA to see healthy demand for its products. Therefore, revenue and EBITDA will increase by 17% each, compared to PAT FY22-FY24E by 21%,” said Yes Securities.
According to Trendlyne data, the company agreed to a strong buy recommendation from 14 analysts. In March 2022, FII / FPI holdings increased from 18.75 percent to 19.92 percent. However, mutual funds have declined from 10.95 per cent to 9.97 per cent over the same period
The average broker target for the stock is Rs 5,569, indicating a 38.93 per cent rise from the current level.
Last week, the company’s board approved a capex plan of about Rs 197 crore for the company’s expansion plans, including a greenfield sanitaryware plant and a brownfield fuseware unit.
Management believes that CapX will meet the growing growth as the firm will now focus on adding more partners to their outsourcing model (currently 59 per cent sanitaryware and 54 per cent calls are outsourced). The new capability will probably provide 2 times A / T at maximum usage.
At CMP, CERA Sanitaryware is trading at 28x / 23x on FY23E / FY24E EPS of Rs142 / 171, respectively. The company traded 30 times on the brokerage FY24E EPS, targeting Rs 5,132.
(Disclaimer: The recommendations, suggestions, opinions and opinions offered by the experts are their own. These do not represent the views of the Economic Times)