Hi all,
the stock has been doing very well in the recent past, are there any thoughts on this? what has changed in the sector?
ConCall Summary - May 2024
FINANCIAL PERFORMANCE
- Revenue increased by INR 547 crore during the quarter, reflecting a growth of 2.6% compared to the same period in the previous year
- EBITDA and EBITDA margins notably increased in Q4 FY 2024
- Gross margin declined due to higher discount offers but offset by cost optimization efforts
- Cash and cash equivalents as of March 31, 2024, increased by 20.5% compared to the previous year
MARKET CONDITIONS AND STRATEGY
- Management anticipates sluggish demand conditions to continue in Q1 FY 2025
- Sales target recalibrated to March 2027 due to market conditions
- Focus on premium and luxury segments expecting growth in luxury segment
- Introduction of new products with innovative designs for luxury customers
- Launching dedicated brand stores for premium offerings
- Commitment to traditional segments while advancing in premium market stance
- Increase in new design and product launches, accounting for 30-35% of total sales
OPERATIONAL UPDATES
- Company maintained and slightly improved its sales compared to the previous year despite challenging market conditions
- Strong track record of retaining top talent at Cera
- Introduction of an ESOP scheme to motivate and reward key human resources
- Multiple initiatives underway including capacity expansion, product development, advertising, and marketing
OUTLOOK AND GROWTH INITIATIVES
- Optimistic that demand situation will improve post Q1 FY 2025
- Real estate upswing expected to positively impact projects and demand
- No price rise in sanitary ware for the past 20 months, recent 2% increase in February 2024 to offset input costs
- Cost-saving program and margin improvement efforts expected to continue in FY 2025
SALES AND DISTRIBUTION
- Dealers common for sanitary ware and faucet ware
- Continuous process of enrolling new dealers to reach new areas
- Slow demand affecting sales despite increased distribution touchpoints
- Market size estimates for sanitary ware and faucet ware
- No significant loss of market share expected despite sluggish market conditions
PRODUCT SEGMENTS
- Premium mix percentages for different product segments
- Explanation on decline in gross margins and offsetting initiatives
COMPETITION
- Competition from new players entering the industry
- New competitors sourcing from outsourcing partners, limited dealer network
- Management plans to rejuvenate the Senator brand and focus on the luxury segment
FINANCIAL GUIDANCE
- Target for luxury brands to contribute 8% to 10% of total turnover by 2,900
- Premium for luxury brands compared to Cera premium brands expected to be 60% to 70%
- Price hikes dependent on market conditions and competitor reactions
- Focus on cost optimization to protect margins in the current market scenario
- Margins expected to improve as demand situations improve
- Cash reserves around INR 828 crores as of March 2024, with approved dividends of INR 60 per share
- Revenue CAGR guidance of 16% based on volume increase of 10% to 13%, mix benefit of 4% to 6%, and price impact of 2% to 3%
FUTURE PLANS
- Routine capex for the next financial year around INR 25.4 crores
- Greenfield expansion for sanitary ware estimated at INR 150 crores
- Capacity utilization and expansion plans
4 Likes
The company intends to buyback up to 1.08 lakh equity shares of the company or 0.83% of the total paid up equity share capital for a total sum of ₹130 crore. Record date for the buyback has been fixed as August 16, 2024.
Price for the buyback has been fixed at ₹12,000 per share
Q1FY25 Concall Summary
Business Updates
- Q1FY25 continues to witness severe challenges on demand but there is confidence that growth will gain momentum in H2
- The idea is to strengthen the presence in the luxury segment in the next five years
- The monthly production capacity for faucets has increased from 3 lakh units to 4 lakh units now post the recent expansion done last year
- In FY24 the company spent Rs 65 crores on advertisement which is its highest ever amount spent
- The cash on hand stood at Rs 864 crores as on June 2024
Participants
PL India
Pi Square Investments
Yes Securities
Shree Investments
DAM Capital
UTI Mutual Fund
Marcellus
PINC Wealth
QnA
- There is a slowdown in demand across the country and it is not that it is more pronounced in one segment versus the other
- The gas prices were favorable in Q1 as well and the average prices were stable from Gail compared on a sequential basis
- The target as of FY27 in terms of revenue CAGR of 16% remain intact and the anticipation is that demand shall be better from H2 onwards
- The sanitary ware industry is Rs 5000 crores in size and faucet ware industry is around 8000 crores in the organized market
- The B2B vertical is seeing improvement already and the project side has picked up pace. The consumer vertical has been slower since Q3 of last year
- Currently the distribution model is mostly dealer centric and benefits from company go to dealer, which is in turn passed on to retailer. The idea of the loyalty program is to gather data in terms of retailer profile the company possesses and also give benefit directly to retailer
- The acquisition of land for sanitary ware plant has taken time because some portion that was not acquired is in multiple small parcels and is taking some time to complete
- The faucet ware plant was operating at 84% utilization and sanitary ware at 75% in Q1
- The margins are slightly higher from premium segment but mostly it is same across all segments in the sanitary ware segment
- In faucet ware the margins in entry level products is better than in premium products
1 Like
No buybak allotment to retail (less than 2lakh investment) shareholders or it was a lottery allotment? I purposely bought 18 shares of Cera, I see 0 entitlement in the intimation!
How have they fulfilled 15% retail buyback requirement?
buyback offer start date is 22nd august. Not sure how you was able to apply before that.
I guess you probably mean buyback record date. If so there is difference in record date and buyback offer date. You can have quick search on cera buyback and you can find the details.
Will delete the message after some time
This can happen when the calculated entitlement is less than 1. I suggest you tender all your 18 shares, most likely they will buyback at least 1 share from each shareholder.
1 Like
That I understood, but how they will fulfil 15% allotment requirement to small investors?
Cera Sanitaryware -
Q1 FY 25 concall and results highlights -
Revenues - 398 vs 427 cr, down 7 pc
EBITDA - 56 vs 68 cr ( margins @ 14 vs 16 pc )
PAT - 47 vs 56 cr
A&P spends in Q1 were @ 11 cr. For full FY 24, A&P spends were at 64 cr
Cash and Cash equivalents @ 864 cr
Intense heat wave conditions and the slowdown caused by general elections led to subdued demand conditions in Q1
Product wise breakdown of revenues -
Sanitaryware contributed to 53 pc of revenues
Faucets contributed to 36 pc of revenues
Tiles contributed to 9 pc of sales
Wellness contributed to 2 pc of sales
Segment wise breakdown of revenues -
Luxury/Premium Segment - 44 pc
Mid Segment - 32 pc
entry Segment - 24 pc
City wise distribution of sales -
Tier -1 - 35 pc
Tier -2 - 22 pc
Tier - 3 - 43 pc
Company expects a significant pickup in business wef H2
Company sells its products under 4 prominent brand names - CERA, SENATOR, LUSTRE, LUXE
Senator, Lustre and Luxe are focussed towards the premium and luxury segments
In Q1, company’s imports from China were @ 7 cr - showing increasingly reduced dependence on China
LY, company increased its faucets ware capacity from 3 lakh pieces / month to 4 lakh pieces / month
Company has acquired a land parcel for a new Greenfield sanitaryware facility
Capacity utilisation of Sanitaryware and Faucetware plants in Q1 were @ 76 and 84 pc respectively
B2C sales were @ 64 pc of total revenues. Rest were from B2B/project markets
Gas prices remained favourable in Q1. Gas from GAIL was available @ Rs 28.38/ cubic meter vs Rs 29.31 in Q1 FY 24. Gas from Sabarmati Gas Ltd was available @ Rs 51.40 vs Rs 50.01 in Q1 FY 24. Blended cost of gas was @ Rs 31.64 vs Rs 33.91 ( as the company’s sourcing from GAIL increased from 78 pc to 86 pc YoY )
Guiding for full FY 25 EBITDA margins @ 16-17 pc. Intend to grow sales @ 16 pc CAGR for next 3 yrs ( maintaining the guidance despite a weak Q1 )
Estimated total size of Sanitaryware and Faucetware industry ( organised + unorganised ) @ Rs 9000 cr and Rs 14000 cr respectively
Company has started seeing improvement in B2B business post general elections. Company is expecting the rub off to happen in the B2C segment too - by H2 this yr
Company is investing aggressively behind the - Senator, Luxe, Lustre brands - basically to build a stronger presence in the Luxury space
Disc: initiated a tracking position, intend to add more if the price corrects or if the sales pick up, not SEBI registered, not a buy/sell recommendation, biased
7 Likes
Cera Sanitaryware -
Q2 FY 25 results and concall highlights -
Revenues - 493 vs 463 cr
EBITDA - 88 vs 87 cr ( margins @ 18 vs 19 pc )
PAT - 69 vs 57 cr ( due reduced tax rate )
Sanitaryware and Faucets accounted for 46 pc and 41 pc of sales
Have taken 6 pc price hikes in faucets and 1 pc hike in sanitary ware in Sep 24. This should help cushion their margins going forward
Company sells its products under 4 prominent brand names - CERA, SENATOR, LUSTRE, LUXE
LY, company increased its faucets ware capacity from 3 lakh pieces / month to 4 lakh pieces / month
Company has acquired a land parcel for a new Greenfield sanitaryware facility. Not likely to commence construction in current FY - looking at the current mkt situation. Complete build up of the facility should take 18 months from day Zero
Company is investing aggressively behind the - Senator, Luxe, Lustre brands - basically to build a stronger presence in the Luxury space
Capacity utilisation for sanitary ware and faucet ware @ 89 and 91 pc in Q2
Advertisement spends in Q2 @ 16 cr vs 15 cr in Q2 FY 24
B2B sales @ 37 pc of total sales
Completed a buyback of shares worth 150 cr @ Rs 12k/share
Seeing early signs of demand recovery in an otherwise challenging macro environment. Should see better performance in H2
Gas prices from GAIL stood @ Rs 28.5 / cubic meter, from Sabarmati Gas ltd stood @ Rs 53.9 / cubic meter in Q2. Company bought 78 pc ( vs 70 pc in Q2 FY 24 ) of their Gas requirements from GAIL in Q2
Segment wise YoY growth -
Sanitaryware - (-) 6 pc
Faucetware - 20 pc
Tiles - (-) 11 pc
Wellness products - 38 pc
Category wise sales contribution -
Premium - 41 pc
Mid segment category - 34 pc
Entry level category - 25 pc
City wise sales distribution -
Tier - 1 - 34 pc
Tier -2 - 21 pc
Tier - 3 - 45 pc
Cash on books @ 659 cr ( lower vs LY due stock buyback during Q2 )
Company is holding onto its guidance of 2900 cr in topline by Mar 27. They expect high single digit growth in FY 25 despite weak Q1 and Q2
Projects business ( B2B ) was up 15 pc in H1. Expect this strong projects demand to continue in H2 as well. Its the retail ( B2C ) demand which has been tepid
Guiding for EBITDA margins of 15-16 pc for full FY 25
Company can take up the capacity of sanitary ware segment to 120-125 pc. Hence, they are currently waiting before commencing the Greenfield expansion. Plus they can also outsource a proportion of production
Company intends to set up a total of 50 stores selling only their Luxury brands ( 25 stores in this FY and another 25 in next FY ). They intend to take Luxury segment sales of their brands to around 10 pc in next 3-5 yrs. It should be a long drawn affair. In the meantime, they ll keep focussing more on the Premium segment
The growth in Faucets in Q2 was not led by price cuts
As a number of RE projects launched post COVID start nearing their possession dates, company expects strong growth for their products in FY26,27 - hence the guidance for a 2900 cr topline
The Greenfield expansion that the company intends to do wef next FY is expected to be in 2 phases. In phase 1, they ll add capacities of aprox 1.2 million pieces of sanitaryware / yr. This should cost them around 100 cr. This should have an annual revenue potential of Rs 300 cr / yr
Company reiterated that the strong RE sales post COVID will eventually lead to strong demand for building materials Industry. Its just that it takes 3-4 yrs for project completion and the wait has been rather painful
Disc: holding, biased, not SEBI registered, not a buy/sell recommendation
5 Likes
There were reports of anti-dumping investigations being initiated in the US on imports from Morbi. Is there any further update on that?
I wasn’t aware - did quick search this is the latest I could gather.
The U.S. Department of Commerce (Commerce) preliminarily determines that ceramic tile from India is not being, or is not likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is April 1, 2023, through March 31, 2024. Interested parties are invited to comment on this preliminary determination.
3 Likes
Cera Sanitaryware -
Q3 FY 25 results and Concall highlights -
Revenues - 452 vs 439 cr
EBITDA - 62 vs 61 cr ( margins @ 14 vs 14 pc - flat YoY )
PAT - 46 vs 52 cr
Company sells its products under 3 prominent brand names - CERA, SENATOR, LUXE. Company is investing aggressively behind the - Senator, Luxe, Lustre brands - basically to build a stronger presence in the Luxury space
LY, company increased its faucets ware capacity from 3 lakh pieces / month to 4 lakh pieces / month
Company has acquired a land parcel for a new Greenfield sanitaryware facility. Not likely to commence construction in current FY - looking at the current mkt situation. Complete build up of the facility should take 18 months from day Zero. Company can take up the capacity of sanitary ware segment to 120-125 pc. Hence, they are currently waiting before commencing the Greenfield expansion. Plus they can also outsource a proportion of production
Company intends to set up a total of 75 stores selling only their Luxury brands ( 25 stores in this FY and another 50 in next FY ). They intend to take Luxury segment sales of their brands to around 10 pc in next 3-5 yrs. It should be a long drawn affair. In the meantime, they ll keep focussing more on the Premium segment
Did not see the expected demand pick up in Q3. B2B demand was good, retail demand remained tepid
Q3 revenue breakup -
Sanitaryware - 50 pc
Faucetware - 37 pc
Tiles - 11 pc
Welness products - 2 pc
Have been aggressively developing high-tech, luxury products under the Senator / Luxe brand - to increase their mkt share in the luxury segment
Capacity utilisation levels @ faucet ware, sanitary ware segments remain @ around 90 pc
B2B sales accounted for 35 pc of company’s sales for 9M FY 25
Guiding for lower single digit topline growth for FY 25
Avg Gas prices in Q3 -
From GAIL - Avg 28.29/ mtr qube
From Sabarmati Gas - Avg 45.31 / mtr qube
Weighted Avg @ 33 / mtr qube ( as bulk of the procurement happens from GAIL )
Gas costs for the full Qtr were @ aprox 6 cr
WC days increased from 60 to 76 days in Q3
Geography wise sales for Q3 -
Tier 1 - 35 pc
Tier 2 - 21 pc
Tier 3 and below - 44 pc
Cash on books @ 662 cr, down from 774 cr ( due buy back that happened in Q2 )
Company aspires to achieve EBITDA margins @ around 16 -17 pc - but that may happen only when the demand scenario improves ( so that company doest have to offer discounts )
Recent budget announcements + rate cuts from RBI may lead to some demand recovery in 1-2 Qtrs
The sluggishness in retail demand has been in the mkt for last 4-5 Qtrs now
Company has been resorting to discount sales for last 4 Qtrs now due sluggish demand scenarios ( and hence the margin contraction )
Outsourcing : Captive manufacturing mix for 9M FY 25 -
Sanitaryware - 57:43
Faucets - 48:52
Generally company manufactures value added, hi-tech products in house and outsource the others
Historically, company’s project : retail sales were @ 30:70 which has now gone to 35:65 due faster growth in the projects side of the business and sluggishness in retail demand
Luxe and Senator brands should contribute to 10 pc of sales by end of FY 27. Margin profiles for Luxe and Senator brands should be significantly better than the Cera brand of products
Disc: holding, biased, not SEBI registered, may add if the demand scenario improves, not a buy/sell recommendation
6 Likes