Real Estate is not completely down, many incomplete projects are getting completed rapidly. Plus, there is frenetic activity happening in affordable housing but all that does not seem to have rubbed on Cera at least. The movement from Unorganized to Organized due to happen after GST is another expectation belied. Or maybe the current results are after benefitting from these tailwinds, else sales would have been even lower.
The company operates in a mature product category where the long run natural growth rate for the industry should be around the nominal GDP growth rate. A better company may do better than that, but not too much better. Business has no entry barriers, so competition will keep product prices down.
Brands are not important, I would categorize this product largely as a commodity only. People don’t really show off their sanitaryware or faucets, it is not an iPhone. May be at a very premium end yes, but there the market size is very small.
If Cera had a moat, margins would be high or at least rising but no such trend is visible. Growth rate is coming down, 10 year Sales CAGR > 5 CAGR > 3 CAGR > TTM (from Screener) and almost same trend is seen in profits too.
All in all, Cera became a multi bagger when it started out small. But as it grows, it will slowdown. Benefit of high ROE gets diluted when one buys at many multiples of Book Value. I think valuation should be much lower for it to become a strong buy again. Or a dream period like 2003-07 should return. Right now, it is nowhere in sight.
(Disc: Held previously, but no exposure at present)