Views on Cera Sanitaryware Ltd results - Angel Broking

Views of Ms. Twinkle Gosar (Equity Research Associates-Mid Caps, Angel Broking) on Cera Sanitaryware results:

Cera Sanitaryware Ltd (CMP: Rs 848, TP: Rs 934, Upside: 10%)

"Cera Sanitaryware Ltd. (CSL) reported strong set of numbers for 4QFY2014. Top line surged by 38.1% yoy to Rs. 218cr, 8.4% higher than our expectation of Rs. 201cr. On operating front, EBITDA grew by whooping 69.4% yoy to Rs. 35cr while margins expanded by 297 basis point yoy to 16.1% owing to decline in raw material cost by 271bp yoy as percentage of sales. Consequently, net profit rose by 38.4% to Rs. 19cr, amidst higher tax outgo (40.5% of PBT); however, higher than our estimate of Rs. 12cr.

On annual front, top line for FY2014 grew by 36.0% to Rs. 664cr as compared to our estimate of Rs 647cr. Historically, Cera has witnessed a strong top-line CAGR of 36.5% over FY2010-14. The traction is expected to continue owing to Cera's continuous marketing efforts to strengthen the brand and increase the visibility. On EBITDA front, operating profit grew by 26.3% while margins contracted by 112bp to 14.3% in FY2014. Dip in margin is mainly attributable to the increased raw material expense by 218bp as percentage of sales. Bottom line for the year came in at Rs. 52cr, higher by 7.8% yoy and our estimate of Rs. 45cr. PAT margin came in at 7.8% vis-à-vis 9.5% previous year mainly on account of increased tax outgo of 37.0% of PBT (31.9% in FY2013).

Considering the low-penetration level of sanitation in India, change in lifestyle of the people, increasing nuclear families and real estate growth; the sanitaryware industry growth is on an uptrend. Thus, with increasing awareness about the brand 'Cera' and its recently expanded capacity, Cera is well placed to benefit from the growth in the sanitaryware industry. We recommend Accumulate rating on the stock with a revised target price of Rs. 934, based on a target P/E of 16x for FY2016E."

Source : Equity Bulls

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