Cera Sanitaryware - 4QFY2013 Result Update - Angel Broking

Cera Sanitaryware (CSL) reported a strong set of numbers for 4QFY2013. The top-line surged by 57.6% yoy to Rs. 158cr, 21.5% higher than our expectation of Rs. 130cr. The EBITDA grew by 30.1% yoy to Rs. 20.8cr, in line with our estimate of Rs. 20.7cr. The EBITDA margin dipped by 278bp yoy and came in at 13.1% mainly due to the rise in raw material cost. Net profit grew by 50.7% yoy to Rs. 14cr on account of higher other income and a lower tax expense for the quarter.

Expanded capacity and high brand visibility to aid revenue growth

CSL has expanded its capacity of sanitaryware unit from 2.0mn pieces per annum (p.a.) to 2.7mn pieces p.a. in FY2013 and is planning to expand it further to 3mn pieces p.a. in FY2014. The expansion will thus enable CSL to en-cash on the opportunity emerging from the consistently growing sanitaryware demand owing to factors like urbanization, rising standard of living, changing lifestyle, growing construction activities etc. Simultaneously, high brand visibility, due to consistent marketing efforts (marketing cost has grown at 36% CAGR over FY2008-12), is expected to further boost revenue growth going forward.

Outlook and valuation

We expect CSL's consistent marketing efforts coupled with expansion of its product portfolio (in the tiles segment) to help it post a revenue CAGR of 27.6% over FY2013-15E to Rs. 795cr. The EBITDA and net profit are expected to grow at a CAGR of 19.8% and 18.3% over the same period to Rs. 108cr and Rs. 65cr respectively. At the current market price, the stock is trading at a PE of 8.7x FY2015E. As we rollover to FY2015, we maintain our Buy recommendation with a revised target price of Rs. 562, based on a target PE of 11x for FY2015E.

Source : Equity Bulls

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