Hi Abhishek,
As per moneycontrol, Cera FY13 EPS is 36.5. So, are you expecting only a 10% rise in the profit in FY14? If you are expecting a 20%+ growth in revenue, would it not be fair to assume a 25% kind of growth in EPS?
I found the Ar little lacking in details, compared to say a Kajaria ceramics AR.
Few points,
1). Didnât find the details of revenue breakup between the 3 segments, sanitary ,faucet, and bath ware division.
2). Company gave detail of capacity expansion only in the sanitary ware segment from 2 mn to 2.7 mn pieces at a capes of 38.5 cr. combine this point with first one, and its not easy to deduce the next year sales figure assuming they can sell that they produce.
3). Receivables have swelled to 83 cr. compared to 45 cr. last year. In theory this should mean, push of products to dealers who are yet to pay up or actual sales yet to take place.both cases are not looking good.
4). Am pretty happy with their branding and distribution effort though, from what I have heard and seen in my circle. While they might be considered inferior in brand recall compared to say parry ware of hind ware, I think they are up to the job.
Itâs a hold for me at this level in expectation of 20-25% growth.
http://www.cera-india.com/Content.aspx?conId=CorporatePresentation
This gives the segment-wise breakup.
Ceramics firms face coal crunch as Gujarat pollution body seals Navlakhi port
This affects players in the Morbi area. Ceramics goes hand in hand with Sanitary Ware in Morbi, Gujarat.
Note to admin - I am posting a link to my website simply because the content runs into around 25 pages. Hope thatâs not a problem. If it is, do let me know.
I had done a detailed study of Cera Sanitaryware.
Disclosure - am invested in Cera.
Counter-views would be good to hear from the Valuepickr community. In fact those are most important. Thanks.
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Since Cera uses natural gas, will the hike in domestic gas prices from 4.2$ to 8$ (April -2014)drag Cera downâŚOr has Cera shifted to Coal ?
Business Today has given a target of 700, which is in accordance of our analysis based target as discussed in Hemant bhaiâs portfolio thread.
subhash,
have you looked at HSIL which is also mentioned in the report,the brand has a higher visibility than cera,some years before when i was interested in investing in the sanitaryware sector,HSIl commanded higher valuation than cera,now the tables have turned.HSIlâs stock price is going down,do you think it can be a dark horse,maybe we can do some comparative analysis on their business models.Maybe HSIL could get rerated after it gets rid off its glass business to its original P/E of 12-13.
Mallikarjun,
Very good query. Natural gas cost is ~15% of ceraâs sales. It gets apm gas and price of this is going to double in FY15 (if not rolled back). Its current ebitda margin is 15%. If it does not pass on extra cost, ebitda margin will be zero in FY15. It will have to take 15% rise in selling price just to pass on this cost increase. However, its competitors are using alternate fuels or non-apm gas where price is not doubling. Hence, competition does not have to raise price. FY14 is comfortable (some impact on margin due to large imports from china and INR depreciating). If gas price hike is not rolled back, cera will be in a tight spot in FY15. If it does not take price hike, ebitda will fall drastically⌠If it does, sales will fall drastically, as competition will not take price increase.
I was surprised by ceraâs upmove today. Views invited.
RsKm,
The power & fuel cost is ~4.67% of companyâs sales in FY13 (4.92% in FY12) as per the FY13 AR. If we consider the product manufactured by the company (excluding trading of higher end sanitaryware, tiles etc), the sales comes to around 287 crore in FY13 with power & fuel cost contributing around 8.06%. One more thing, the hike in natural gas price would eventually be passed on to the customers with some lag of quarter or two. I am not sure about this but I think most of the sanitaryware/tile manufacturers use natural gas as a fuel. Someone else might confirm it.
Never heard of a non fertiliser non power company getting APM gas?
-2014)drag
Excel Monkey,
I think you are right. Most of the ceramic players/sanitary ware companies in Gujarat wouldnât be getting gas at APM price. It will be at market price.
Never heard of a non fertiliser non power company getting APM gas?
-2014)drag
Hi Excel didnât get you. Was Cera getting gas @ market prices as mentioned by you and Ankit ? If the hike from 4.2 to 8$ doesnât impact cera, its good.
Coming to recent developments, GSPC and Adani have hiked prices. Donât know from whom cera sources its gas.
Going forward, imported gas will cost more taking rupee depreciation into account.
Mallikarjun,
Dear RsKm, i was not aware about difference in price mechanism of APM and Non-APM gas. Are you sure Cera uses APM gas ? May be we both are wrong. Excel and Ankit have replied that Cera gets gas at market price. Then the hike from 4.2 to 8$ may not affect Cera.
Recent developments
GSPC/ Adani have raised prices. The link is in previous reply. If rupee depreciates further ( i am of the view it will depreciate), imported gas will cost more. If Cera sources gas from GSPC, it will cost cera more.
Was lucky to add Cera along with Poly medicure from last 2/3 weeks. Technically both are strong as mentioned by hemant bhaiya.
Cera didnât correct much on doubling of gas prices.And it went ex dividend.I am expecting a range between 600-650rs in 1 year.I hope it does.That was the reason i added more.(For target to be achievedGrowth is the key).
Since Q1results are on 11th, the results may be good considering todayâs rally.
Disclosure- Invested.Hence views are biased.
Cera gets APM gas from ongc isolated well through Gail. It had got this gas linkage when the company started. Its current cost of gas is Rs.10.50 per scm (1mmbtu = 25.2scm) or $4.33 per mmbtu.
As per a source in the company, Ceraâs competitors do not get apm gas and buy regassified imported LNG and the cost at present is $15 per mmbtu. Their cost will not rise due to doubling of gas price.
Thanks for providing clarity on gas pricing
It would be great to know the advantage they have over other players because of the cheap gas.
Probably most of the delta in profitably viz other players for cera might be coming from cheap gas
Ankit,
Gas cost is 15% of manufactured sales. Ceraâs trading sales is more than double that of its manufactured sales.
Hi RsKm,
Something is missing in your numbers. You are saying that Ceraâs competetors are able to make huge profits(HSILâs sanitaryware business isgreat and only drag is glass devision)even after procuring gas at 15$, while Cera will have zero profits at 8$. If both of these are correct then either cera is an extremely inefficient company or their products must be selling dirt cheap compared to their competitiors. I am not sure about the first part, but if second one is true then they should be able raise their prices and still make more profits than their competetors.
Just to give a comparison. HSIL has a consistent EBIDTA margin of 17-18% on their building material(Sanitaryware) business. And, this they are achieving after buying gas at 15$, while Cera will become 0% at 8$?? I think we are still missing something here