Wallfort - 29 April 2022

CERA SANITARYWARE Initiating Coverage Report
LIMITED Research Analyst: Anik Mitra

Sector: BUILDING MATERIALS
29th April 2022
Cera Sanitaryware Ltd
Sector: Building Materials
Table of Content
Investment Rationale 3-5
About the Company 6
Facility & Capacity 6
Industry Overview 7
Chart Scan 8-10
Segment wise Performance 11-13
Input cost dynamics 14
Peer Analysis 15-16
Outlook & Valuation 17
Financial Statement 18-22
Risk 23
Disclaimer, Disclosure and Glossary 24
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For Disclaimer and Disclosure please refer to last slide
Snapshot
CMP (29-04-2022) 4164 Investment Rationale
Target(INR) 6270 Organic growth opportunity: Increase in population, rising Urbanization, concept of nuclear family, change in the taste and lifestyle are driving growth
Upside(%) 51% of Sanitaryware and Faucetware. Higher percentage of young population in the country is enhancing lifestyle which in turn generates demand for
products with fashionable look and modern facilities. Cera is pioneer in manufacturing high-end Wall hung Water Closets (WC), Rimless WCs, Sensor
Recommendation Strong Buy
Faucets, Foot Operated Taps which are driving growth of Company.
Recovery in the Real Estate Industry: Sanitaryware and Faucetware Industry has been witnessing tailwind with recovery in the Real Estate market in
India. Government of India(GOI) initiatives like Swachh Bharat, Housing for all have also some meaningful contribution in sanitaryware and faucetware
Bloomberg Code CRS.IN
demand.
Reuters Code CERA.BO Retail focused strategy: Cera has adopted strategy of reaching out retail segment with medium range products which contributes most to the
product portfolio of Company. Retail business has higher margin than Institutional sales and retail segment contributes around 70-75% to portfolio.
Strategy to capture Tier-I,II,III markets: Cera has very strong penetration with 4000+ dealers' network. As per Dec’21 numbers, Tier-I city Sales
contributed around 30%, Tier-II sales contributed around 15% and Tier-III sales contributed around 54% to the topline. Company’s strategy to tap
Tier –III cities along with strong presence in the Tier-I cities gives them an edge to increase market share in their products.
Investment Rationale (Contd…..)
Valuation: Considering the mentioned rationale we are Key Data (in INR cr) FY18 FY19 FY20 FY21 FY22E FY23E FY24E
assigning P/E of 37x to arrive at a price target of 6244. Revenue 1185.34 1351.55 1223.69 1224.33 1501.87 1753.84 2049.89
Revenue growth 17.53% 14.02% -9.46% 0.05% 22.67% 16.78% 16.88%
Shareholding Pattern (%) Dec-20 Mar-21 Jun-21 EBITDA 177.37 198.25 165.47 158.06 220.67 262.16 307.04
Promoters' holding 54.48 54.48 54.48 EBITDA M argin 14.96% 14.67% 13.52% 12.91% 14.69% 14.95% 14.98%
EBITDA growth 1.01% 11.77% -16.53% -4.48% 39.61% 18.80% 17.12%
Institution 29.77 29.71 29.90
PAT 106.12 115.10 110.53 99.91 149.42 181.49 219.98
Non-institution 15.75 15.82 15.62 PAT M argin 8.95% 8.52% 9.03% 8.16% 9.95% 10.35% 10.73%
Stock Scan PAT growth 5.97% 8.46% -3.97% -9.61% 49.55% 21.46% 21.21%
MktCap(INR cr) 5413 EPS (INR) 81.63 88.54 85.02 76.85 114.93 139.60 169.22
P/E (x) 51.01 47.03 48.97 54.18 36.23 29.83 24.61
Outsourcing Shares (in cr) 1.30
ROE 17.52% 16.42% 14.34% 11.46% 15.20% 16.41% 17.55%
Face Value(INR) 5 ROCE 14.27% 13.19% 11.50% 8.79% 11.99% 12.94% 13.92%
Dividend yield 0.29 BVPS (INR) 465.86 539.16 592.88 670.56 756.02 850.95 964.32
Research Analyst: Anik Mitra P/BV (x) 8.94 7.72 7.02 6.21 5.51 4.89 4.32
TTM P/E(x) 36.59
Email : [email protected] EV/EBITDA (x) 30.66 27.45 32.96 34.45 24.35 20.24 16.90
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For Disclaimer and Disclosure please refer to last slide Source: Company data and Wallfort Research
Investment
Rationale
Change in Product mix aiding Margin: Change in weightage of product mix is helping Cera to hold stable margin even in the period of higher raw material and fuel cost. As
contribution of high margin sanitaryware and highest margin faucetware have been going up in the product basket, margin of Company is also getting expanded.
Contribution of relatively low margin tiles business has been going down in percentage terms, although in absolute terms revenue from tiles business is almost constant.
Strong Vendor Network: Sanitaryware facility of Company is running at 103% utilization and faucetware facility is running at 97% utilization at the end of third quarter.
Despite higher capacity utilization, Company has enough room for growth. Currently more than 40% of sanitaryware products and close to 45% of faucetware products
are outsourced. There is room to increase outsourcing business of Company. Apart from this, a manufacturing capacity expansion program is on card. Company has a
strong vendor base who manufacture products for Company within given specification. Vendors are very loyal to Company as some of them are attached to Company
from decades. Vendors are keen to work for reputed brand like Cera and they enjoy flexibility to manufacture for other brands as well. Company deploys its own
employees to monitor manufacturing process as per given specification at vendors’ site.
Higher Shipping Cost put a disruption to cheap import: Cheap import from China renders a challenge to domestic sanitaryware players. Recent GOI push for ‘Make in
India’ program is likely to change structure of industry. Still close to 30% of Sanitaryware Industry is unorganized where Chinese imports plays dominant role. But in last
few quarters, due to sharp rise in shipping cost and container prices, Chinese import has been facing a headwind. Cera is likely to be a major beneficiary of this
opportunity and its going to be right time to establish domestic brands to ‘Make in India’ drive successful.
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For Disclaimer and Disclosure please refer to last slide Source: SIPRI, Company data and Wallfort Research
Investment GOI impetus: GOI schemes like National Infrastructure Pipeline (NIP), Smart city, Atal Mission for Rejuvenation and Urban Transformation (AMRUT) aided demand of
Rationale sanitaryware and faucetware. NIP has been expanded from 6,835 projects in December 2019 to 7,400 projects in Union Budget 2021-22. GOI has increased allocation
towards smart cities in 2022 budget. The total spent towards smart cities is pegged at INR13,750 cr.
Under AMRUT mission GOI is attempting to provide basic household infrastructure and amenities. GOI initially extended buying of affordable housing units under Credit
Linked Subsidy Scheme (CLSS) for middle-income group with an annual income of INR6-18 lakh till 31 March 2021 from March 2020. GOI has further extended buying of
affordable housing units under CLSS till 31 March 2022. GOI has extended time period of AMRUT mission till 2025-26.
With aim of making the cities 'water secure' and 'self-sustainable' through circular economy of water GOI has launched Jal Jeevan Mission. Under this mission, proportion
of households with tap water connection has increased from ~16% in August-19 to ~38% in April-21. According to Ministry of JalShakti during FY21, 323.09 Lakh tap water
connection has been provided to household versus 82.62 lakh in FY20.
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For Disclaimer and Disclosure please refer to last slide Source: Prop Tiger, Company data and Wallfort Research
About the Company

Cera Sanitaryware Ltd was incorporated in year 1998. Company manufactures wide range of sanitaryware and faucetware. It also outsource tiles and wellness products like
basin, sink, mirror etc. It has third largest sanitaryware facility in India.
Cera is also in trading business of tiles. It has acquired 51% stake in Andhra Pradesh based Anjani Tiles Ltd which is subsidiary of the Company and entered into a JV with
Milo Tiles LLP at Morbi, Gujarat with 26% equity for producing high end Glazed Vitrified Floor Tiles aggregating to 16000 Sq. Meter per day.
Formerly Cera group was engaged in Vanaspati & Refined vegetable oil manufacturing business under the head of Madhusudan Oils and Fats Limited. In ‘80s the Company
stepped into sanitaryware manufacturing. Sanitaryware business was demerged & incorporated as Cera Sanitaryware Ltd in year 1998. Madhusudan Oil & Fats Ltd is
currently listed in BSE as Madhusudan Industries Ltd.
Cera started as a single product Company, however over the period of time, it has diversified into faucetware and tiles.
Facility & Capacity

Sanitaryware and faucetware plants of Company are located at Kadi, Gujarat. Tiles manufacturing facility of subsidiary Anjani Tiles Ltd is located at Gudur, Andhra Pradesh. Tiles
manufacturing facility of JV company Milo Tiles LLP is located at Morbi, Gujarat.
• Sanitaryware capacity is 36 lakh pieces per annum

• Faucet capacity is 18.5 lakh pieces per annum
• Combined tiles capacity from subsidiary and JV together is 16000 sq. meter per day
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Industry overview:
Sanitaryware Industry: According to industry estimate, Indian sanitaryware market stood at USD665.36 million in 2020 (i.e. INR4,990 cr), and is expected to reach USD
1,074.71 million by 2027, at a CAGR of 7.38% between 2021 and 2027.
Larger number of sanitaryware manufacturers are located in Gujarat. However, top two players of the country are located outside Gujarat. In terms of sanitaryware
production capacity Parryware is largest producer having manufacturing capacity of 6.3 million pieces per annum followed by HSIL with 4 million pieces per annum. Cera is
third largest player in terms of production capacity having manufacturing capacity of 3.2 million pieces per annum. As per industry source, total domestic capacity by
organized players is 34.35 million pieces per annum. Still almost 30% of industry demand is met by unorganized players who depends on cheap import from China.
Faucetware Industry: Indian faucet Industry has undergone lots of changes from being a basic functional product to a fashion and style statement. Rapid Urbanization,
increase in young population, increase in disposable income, change in lifestyle, preference and exposure to international brand aided transition in faucetware industry.
Indian faucet industry is largely dominated by unorganized players. In organized market Jaquar is major player, floated famous brands like Artize, Jaquar and Essco. Germany
based Grohe is second biggest seller in organized market. Apart, Cera, Kohler, Delta India, Roca, Cavier, Parryware, HSIL, AGMECO and Kajaria are other prominent players.
In faucetware industry, Bathroom faucets dominate most followed by Kitchen segment. As per industry source, faucetware industry is largely dependent on replacement
market hence, renovation drive of old houses and facilities is likely to play a major role in increase in demand.
Tiles Industry: Indian Ceramic Tiles Industry is said to be INR35,000-40,000 cr in 2019. India is second largest tiles manufacturer in world after China and India is also
second largest consumer of tiles. Per Capita consumption of tiles in India is 0.6 square meter which is much lower than average global tiles consumption of 1.4 square
meter . So, there is a big room of growth for Indian tiles players.
Revival in real estate cycle, growth in commercial construction, renovation and home improvement drive of existing houses, increase in disposable income and change in
consumer preference and lifestyle contributes largely increase of demand for tiles. Under this initiative ‘Housing for All’ by GOI, tiles demand has got lots of tailwind.
Indian ceramic tiles industry is largely dominated by unorganized players. Around 70% of tiles manufacturers are concentrated in Gujarat specially in Morbi area. As per
industry source, ~40% of tiles demand is met by organized players. In terms of types, glazed wall tiles contributes the most at ~45% followed by polished vitrified tiles at
~40%, glazed floor tiles contributes ~8% and glazed vitrified tiles contributes around 7% to total industry demand.
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Chart Scan
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For Disclaimer and Disclosure please refer to last slide Source: Wikipedia and Wallfort Research
Chart Scan
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Chart Scan
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Segment wise performance:

Sanitaryware: In sanitaryware segment, Cera manufactures wide range of products from basic products for mass market to modern products like self- cleaning closets,
anti-microbial products, hung Water Closets (WC), Rimless WCs and many more with more than 450 SKUs. It caters all class of people with their variants. ‘Jeet’ is brand for
mass by Cera. Mid segment product under brand name of Cera contributes most in sanitaryware product portfolio. ‘Senator’ is premium segment brand and for luxury
segment, it has introduced brand ISVEA which is imported product.
According to management, Cera enjoys 22% market share of organized sanitaryware market. Contribution of sanitaryware has been growing in product portfolio. In last
five quarters, contribution of sanitaryware has grown from 15% to 53%. Sanitaryware being high margin product, the higher contribution is helping Company to hold its
margin even during period of raw material and fuel price inflation. Due to strong demand in market, Cera is able to pass on higher raw material prices to consumers. In last
five quarters, it took four price hikes, cumulatively which accounts to 22% in sanitaryware segment till Q3FY22.
It has adopted a strategy to penetrate deep in Tier I, Tier II & Tier III cities where larger sales of 54% comes from Tier-III cities, followed by 30% from Tier-I cities and 15%
comes from Tier-II cities.
As per Q3FY22 figure, sanitaryware facility is running at 103% utilization still Company has room for growth due to significant share from outsourced products. Around
59% products is in-house manufactured and rest are outsourced. It has loyal vendors who work with Cera and they have flexibility to manufacture for other players as well.
Cera has patented products and vendors manufacture products for Company as per given specification. Cera is also free to change order pattern from the vendors
according to market demand which gives Cera an edge to expand without larger Capex. It also deploys their engineers to monitor manufacturing process in their vendors’
facility to keep quality intact. In their own facility, it manufactures products which are critical to manufacture. It has done rapid adoption of technology and deployed
robotic pressure casting and robotic glazing for smooth surface of sanitaryware products.
Segment wise Faucetware: Faucetware segment of Cera has also increased its contribution in its product line. In last five quarters since Q3FY21 to Q3FY22, contribution of faucetware
performance has grown from 28% to 35% in topline. Faucetware is highest margin product, hence increase in contribution of product helps to expand its profitability.
It has more than 900 SKUs of faucet prevailing in market. Faucetware facility is running at 97% utilization at the end of Q3FY22. More than 44% of faucetware are
outsourced from vendors. It has installed advanced robotic surface grinding for uniform chromium plating of faucets and modern peeling machine for impeccable body
finish of faucets. In faucetware sales ~30% are entry level products, ~28% are mid-level products and ~43% are premium products.
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Segment wise Tiles: Tiles is mostly trading business of Company. During 2015 Cera acquired 51% equity stake of Anjani Tiles Ltd in Andhra Pradesh which supplies 1/3rd of entire tiles
performance procured by Company. It has also acquired 26% stake in Milo Tiles LLP at Morbi, Gujarat. It sources Glazed Vitrified Floor Tiles aggregating to 16000 Sq. Meter. per day
from both the manufactures.
However, Cera has executed Memorandum of Understanding on 17 August 2021 with Anjani Vishnu Holdings (acquirer Company) for sale of entire 51% stake in equity
and preference shares held in Anjani Tiles. It will receive a consideration of INR28.69 crore in five tranches till 31 March 2023.
It enjoys lower margin than its peers in tiles segment which is high single digit in nature. Tiles find some organic demand from customers of sanitaryware and faucetware,
hence tiles is kept in product basket. At this point of time, Cera is not very much focused in this segment, specially during current period when the Industry has been
facing raw material price inflation and other input cost rise like gas price hike. Divestment of Anjani tiles will not hurt tiles trading business, as they can very well increase
its procurement from other manufacturers in the Morbi area of Gujarat. It has further room to expand tiles business in favourable future course of time.
Input cost Input cost dynamics:

dynamics
Raw Material Price: In Sanitaryware segment China clay, Feldspar and Plaster of Paris constitute more than 95% of raw material requirement. For faucetware important
raw material is Brass. There is a significant rise in raw material prices during FY22. During FY21 consumption of raw material stood at 10.4% to the topline where in
9MFY22 it went up to 16.5% of topline. However, Cera has pass on increased input cost to consumers and had taken four price hikes in last five quarters.
Fuel Price: Energy requirement is met through electricity & natural gas. Electricity is primarily used for faucetware manufacturing and partially in sanitaryware
manufacturing. Among total electricity requirement, 90% is met through non-conventional renewable energy sources which are owned captively by Company. Natural gas
is primarily used to fire sanitaryware products.
Among the Gas requirement, GAIL fulfils around 44% of total demand. GAIL sells gas at much lower prices than prevailing market prices. As per Oct-21, GAIL is charging
only INR13.3 per cubic meter of Gas. Rest 56% of the gas requirement is fulfilled by the Sabarmati Project, JV of GSPC and BPCL. As per Nov-21 update, Sabarmati is
charging INR70 per cubic meter of gas.
Favourable arrangement of energy gives an edge, over its peers during period of natural gas price rise. Significant contribution by lower gas price by GAIL is an advantage
for Cera in terms of cost saving.
Power & Fuel cost varies between 3-5% of the topline of the Company over period of time.
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Peer Analysis
According to industry source, total sanitaryware manufacturing capacity in the country is ~34.35 million pieces per annum. Parryware India, subsidiary of Roca, Spain has
largest manufacturing capacity of 6.3 million pieces per annum. It has four manufacturing facilities at Ranipet, one in Perundurai and one in Dewas, Alwar.
HSIL is second largest sanitaryware manufacturer with manufacturing capacity of 4 million pieces per annum. It has two manufacturing plants at Bibinagar and Bahadurgarh.
Apart from Sanitaryware , it also manufactures faucetware, plastic pipes & fittings which together mentioned as building products by the management. Building product
segment contributes ~38% to top line where larger part of revenue comes from packaging business among which glass bottling contributes most.
Kajaria Ceramic is a listed peer in this space where ~90% revenue comes from tiles business and ~10% revenue comes from plywood and sanitaryware business. Kajaria has
sanitaryware manufacturing capacity of 0.75 million pieces per annum having its facility located at Morbi, Gujarat.
Other players in this industry are Anchor Sanitaryware, Bell Sanitaryware, Somany Ceramic, Kajaria Ceramic, Eros Sanitaryware, Rak Ceramic of Saudi Arabia, Sunrise Pottery
work, Paradise Pottery, Toto India, Delphi Ceramic etc. Apart from that ~30% of the domestic sanitaryware demand is met by unorganized players who are dependent on
cheap import from China.
In faucetware space, Jaquar is one of key player holding more than 50% of organized market share. It has three manufacturing plants in Rajasthan and two in Delhi. Kohler
of US has one manufacturing facility in Jhagadiya, Gujarat. Delta India, a subsidiary of US based Masco is also a prominent player in India.
Kajaria has set up its faucet capacity of 10 lk pieces per annum at Gailpur, Rajasthan. Asian Paints has recently stepped in the faucetware market with their brand Essess.
Apart from that HSIL, Cavier, AGMECO, ROCA of Spain are other key players in India. In the faucetware space HSIL, Kajaria, Asian Paints are listed entity along with Cera.
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Peer Analysis
EPS FY17 FY18 FY19 FY20 FY21 5 yrs. Avg EPS
HSIL 14.25 10.34 2.11 6.7 13.61 9.40
Kajaria 15.94 14.31 14.67 15.93 19.40 16.05
Cera 77.03 81.63 88.54 85.02 76.85 81.82
P/E FY17 FY18 FY19 FY20 FY21 5 yrs. Avg P/E

HSIL 25.26 34.82 170.62 53.73 26.45 62.18
Kajaria 64.67 72.04 70.27 64.74 53.14 64.97
Cera 55.43 52.31 48.23 50.22 55.56 52.35
ROE FY17 FY18 FY19 FY20 FY21 5 yrs. Avg ROE

HSIL 7.10% 5.46% 4.65% 3.85% 7.14% 5.64%
Kajaria 21.60% 16.87% 14.83% 14.79% 16.53% 16.92%
Cera 19.18% 17.52% 16.42% 14.34% 11.46% 15.78%
ROCE FY17 FY18 FY19 FY20 FY21 5 yrs. Avg ROCE

HSIL 6.02% 4.89% 4.25% 3.68% 5.55% 4.88%
Kajaria 17.88% 14.84% 12.89% 13.00% 14.56% 14.63%
Cera 15.35% 14.27% 13.19% 11.50% 8.79% 12.62%
EV/EBITDA FY17 FY18 FY19 FY20 FY21 5 yrs. Avg EV/EBITDA

HSIL 8.24 8.41 7.83 9.25 9.11 8.57
Kajaria 33.20 35.92 36.02 38.98 31.45 35.11
Cera 31.77 31.43 28.14 33.80 35.32 32.09
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For Disclaimer and Disclosure please refer to last slide Source: Bloomberg, Company data and Wallfort Research
Outlook
Based on recovery in real estate cycle, theme of renovation of old facilities, increase in population, urbanization, higher share of young people in population, increase in
disposable income, change in lifestyle, prevailing concept of nuclear family are driving growth of Sanitaryware and faucetware business. Increase in brand awareness,
Make-in-India theme and disruption of Chinese import due to higher shipping cost are helping Cera to increase its market share. Prudent mix of in-house production and
outsourced product helps it to expand topline despite full utilization. Favorable product mix skewed towards higher margin sanitaryware and faucetware is increasing
profitability. Company’s dependence on natural gas and renewable energy for fuel, better places them over their peers.
Valuation
Based on above mentioned rationale we are assigning P/E of 37x on FY24E to arrive at a price target of 6270.
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Financial Consolidated P&L in INR cr FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Total Revenue 1185.34 1351.55 1223.69 1224.33 1501.87 1753.84 2049.89
Statements
% Growth 17.53% 14.02% -9.46% 0.05% 22.67% 16.78% 16.88%
Consumption of Raw Materials 123.85 139.66 146.75 127.22 245.46 278.86 321.83
Purchase of Traded Goods 430.25 489.52 431.46 453.54 533.58 613.84 696.96
Increase/Decrease in Stocks -38.47 -23.01 -27.95 46.04 -84.64 -76.25 -69.25
Gross Margin 56.50% 55.15% 55.03% 48.80% 53.76% 53.45% 53.68%
Employees Cost 149.31 165.46 170.74 153.68 199.46 213.97 250.09
Other Expenses 343.03 381.67 337.22 285.79 387.34 461.26 543.22
Total expenses 1007.97 1153.30 1058.22 1066.27 1281.21 1491.68 1742.85
EBITDA 177.37 198.25 165.47 158.06 220.67 262.16 307.04
EBITDA Margin 14.96% 14.67% 13.52% 12.91% 14.69% 14.95% 14.98%
EBITDA Growth% 1.01% 11.77% -16.53% -4.48% 39.61% 18.80% 17.12%
Depreciation 27.14 27.98 38.77 39.57 39.56 42.55 41.30
EBIT 150.23 170.27 126.70 118.49 181.11 219.61 265.74
Interest 9.76 8.54 10.05 9.73 9.17 10.40 10.71
Other Income 14.45 18.56 18.22 25.16 27.73 33.32 38.95
EBT 154.92 180.29 134.87 133.92 199.67 242.53 293.98
Exceptional Items 154.92 180.29 134.87 133.92 199.67 242.53 293.98
EBT after exceptional item 48.80 65.19 24.34 34.01 50.26 61.05 73.99
Tax 9.76 8.54 10.05 9.73 9.17 10.40 10.71
Tax rate% 31.50% 36.16% 18.05% 25.40% 25.17% 25.17% 25.17%
PAT 106.12 115.10 110.53 99.91 149.42 181.49 219.98
PAT Margin 8.95% 8.52% 9.03% 8.16% 9.95% 10.35% 10.73%
PAT Growth% YoY 5.97% 8.46% -3.97% -9.61% 49.55% 21.46% 21.21%
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Consolidated Balance sheet in INR cr FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Financial Equity and Liabilities
Statements Equity Share Capital 6.5 6.5 6.5 6.5 6.5 6.5 6.5
Other Equity 599.12 694.41 764.24 865.23 976.23 1099.73 1247.12
Total Equity & Liability 522.15 605.62 700.91 770.74 871.73 982.82 1106.23
Minority Interest 6.74 10.33 7.68 11.72 11.72 11.72 11.72
Liabilities
Borrowings 45.90 39.55 43.45 42.62 38.80 47.00 45.93
Lease Liabilities 0.0 0.0 14.05 10.95 10.95 10.95 10.95
Other Financial Liabilities 0.17 0.16 26.19 27.5 45.1 52.8 65.9
Deferred Tax Liabilities (Net) 39.05 46.60 29.95 30.25 30.25 30.25 30.25
Other Non-Current Liabilities 16.7 22.67 0.14 0.13 0.14 0.13 0.13
Long Term Provisions 6.86 6.67 10.65 10.25 10.25 10.25 10.25
Total non-current liabilities 108.68 112.65 124.43 121.70 135.44 151.37 163.39
Current Liabilities
Borrowings 45.91 44.69 40.99 30.25 43.25 50.82 66.72
Total Trade Payable 94.35 110.94 95.51 155.36 138.80 165.74 198.49
Lease Liabilities 0.00 0.00 5.62 5.39 5.39 5.39 5.39
Other Financial Liabilities 151.84 169.29 154.95 152.24 240.30 298.15 342.33
Short Term Provisions 3.74 2.85 2.66 2.48 2.48 2.48 2.48
Other Current Liabilities 19.66 25.57 17.74 25.40 34.54 43.85 53.30
Current Tax Liabilities (Net) 9.50 13.72 0.35 4.39 4.39 4.39 4.39
Total current liabilities 325.00 367.06 317.82 375.51 469.15 570.82 673.10
Total Equity and Liabilities 1046.04 1190.95 1220.67 1380.66 1599.13 1840.14 2101.83
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Consolidated Balance sheet in INR cr FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Financial
Property, Plant and Equipment 359.07 384.46 419.74 400.93 390.56 394.48 404.08
Statements
Capital Work-in-Progress 4.89 19.67 0.53 1.33 1.95 1.97 2.02
Right-of-use assets 0 0 17.6 13.78 13.78 13.78 13.78
Fixed Assets 363.96 404.13 437.87 416.04 406.29 410.23 419.88
Intangible Assets 1.07 0.88 1.2 0.76 0.73 0.66 0.61
Investments in Associates 0.00 0.00 8.17 8.22 8.22 8.22 8.22
Other Investments 0.00 0.00 30.63 32.06 31.35 31.70 31.52
Non-Current Investments 26.74 20.81 7.47 6.55 7.01 6.78 6.90
Other Non-Current Assets 15.36 25.04 13.55 14.12 13.79 13.21 13.52
Total Non-current Asset 407.13 450.86 498.89 477.75 467.39 470.80 480.65
Investments 108.59 157.05 189.49 434.05 553.78 661.19 714.21
Inventories 193.51 215.78 242.98 199.66 283.69 316.67 358.73
Trade Receivables 268 298.35 222.85 209.67 154.36 175.38 204.99
Cash and Cash Equivalents 21.68 11.02 2.15 10.41 77.77 154.55 270.07
Bank Balances other than Cash and Cash Equivalents 1.96 0.00 1.31 2.74 2.74 2.74 2.74
Other Financial Assets 13.15 0.00 22.73 26.58 29.37 31.64 39.05
Other Currents Assets 32.03 57.89 40.27 19.8 30.04 27.18 31.40
Total Current Asset 638.92 740.09 721.78 902.91 1131.74 1369.35 1621.18
Total Assets 1046.05 1190.95 1220.67 1380.66 1599.13 1840.14 2101.83
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Cash flow Statement in INR cr FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Financial Cash flow from Operating activities
Statements Profit for the year 154.92 180.29 134.87 133.92 199.67 242.53 293.98
Depreciation & Amortization expenses 27.14 27.98 38.77 39.57 39.56 42.55 41.30
Finance Cost ( Other than Loss on Foreign Fluctuation) 9.76 8.54 10.05 9.68 9.17 10.40 10.71
Interest on Security Deposit (Non-Cash) -0.18 -0.19 -0.19 -0.14 0.00 0.00 0.00
Operating Profit before Working Capital Changes 177.83 202.56 174.88 166.03 248.40 295.48 345.99
Changes in Working Capital -49.05 -21.40 4.66 131.60 67.83 59.16 34.04
Cash Generated from Operations 128.78 181.16 179.54 297.63 316.23 354.64 380.03
Income Tax paid -53.36 -56.68 -50.49 -29.63 -50.26 -61.05 -73.99
Net Cash 75.42 124.48 129.05 268.00 265.97 293.59 306.03
Cash flow from Investing activities
Purchase of Property, Plant & Equipment -57.56 -56.69 -45.81 -14.42 -24.98 -38.22 -44.74
Capital Work-in Progress & Capital Advances 0.00 0.00 -0.52 -0.24 -1.95 -1.97 -2.02
Net cash (used in)/generated from Investing activities -41.01 -110.42 -79.71 -242.33 -146.66 -147.60 -99.77
Cash flow from financing activities
Proceeds/ (Repayment) of Long-Term Borrowings (Net) -13.07 -4.35 5.04 2.49 14.70 6.64 7.76
Proceeds/ (Repayment) of Short-Term Borrowings (Net) 4.73 -1.22 -3.70 -10.74 -9.93 -7.37 -15.20
Dividend Paid -15.61 -15.61 -33.82 0.00 -44.82 -58.08 -72.59
Finance Cost (Other than Non-Cash) -9.21 -7.42 -7.95 -7.86 -9.17 -10.40 -10.71
Net cash (used in)/generated from Financing activities -33.91 -29.02 -55.17 -18.83 -49.22 -69.21 -90.74
Net increase/(decrease) in cash & Cash equivalent 0.52 -15.01 -5.83 6.84 70.09 76.78 115.52
Add cash & Cash equivalent at the beginning of the year 21.15 21.67 6.67 0.84 7.68 77.77 154.55
Cash & Cash equivalent at the end of the year 21.67 6.66 0.84 7.68 77.77 154.55 270.07
21
Financial Ratio Analysis FY18 FY19 FY20 FY21 FY22E FY23E FY24E
Statements
EPS 81.63 88.54 85.02 76.85 114.93 139.60 169.22
P/E 51.01 47.03 48.97 54.18 36.23 29.83 24.61
ROA 10.14% 9.66% 9.05% 7.24% 9.34% 9.86% 10.47%
ROE 17.52% 16.42% 14.34% 11.46% 15.20% 16.41% 17.55%
ROCE 14.27% 13.19% 11.50% 8.79% 11.99% 12.95% 13.92%
BVPS 465.86 539.16 592.88 670.56 756.02 850.95 964.32
EV 5437.42 5441.73 5454.50 5445.41 5374.23 5305.65 5189.06
P/BV 8.94 7.72 7.02 6.21 5.51 4.89 4.32
Debt to Equity 0.08 0.06 0.06 0.05 0.04 0.04 0.04
EV/EBITDA 30.66 27.45 32.96 34.45 24.35 20.24 16.90
22
Risk:
i) Slowdown in economy may result slowdown in demand for sanitaryware, faucetware and tiles.
ii) Slowdown in real estate sector, delay in execution of GOI schemes like Jal Jeevan mission, AMRUT may impact adversely to the performance.
iii) Consistent raw material price inflation may impact adversely to the profitability.
iii) Volatility in crude price impacts it adversely however, the impact is limited.
iv) Gas price hike obviously is a concern for the sanitaryware facility as most of sanitaryware facility is running on natural gas.
23
Disclaimer and Disclosure
Rating % upside
Accumulate 0-10%
Buy 10-20%
Wallfort Research is also available on Bloomberg <Code WFSR> Strong Buy Above 20%
SEBI Registration No. INH000001824
Wallfort Financial Services Ltd (WFSL) or its research analysts or its associates or his relatives (i) might have any financial interest in the subject Company (ii) might have actual/beneficial ownership of one per cent or more
securities of the subject Company at the end of the month immediately preceding the date of publication of the research report and (iii) might have any material conflict of interest at the time of publication of the research report.
Wallfort Financial Services Ltd or its analysts did not receive any compensation or other benefits from the subject Company or third party in connection with the preparation of the research report. Wallfort Financial Services Ltd
or its Research Analysts might have any material conflict of interest at the
time of publication of this report. WFSL nor its RA or its associates have not managed or co-managed public offering of securities for the subject Company in the past twelve months. WFSL or its associates have not received any
compensation for investment banking or merchant banking or brokerage services from the subject Company in the past twelve months. WFSL or its associates have not received any compensation for products or services other
than investment banking or merchant banking or brokerage services from the subject Company in the past twelve months.
It is confirmed that Mr. Anik Mitra, Research Analyst of this report has not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not
based on any specific merchant banking, investment banking or brokerage service transactions. The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal
views about the subject Company or companies and it’s or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
The research analyst has not served as an officer, director or employee of the subject Company. Wallfort Financial Services Ltd or its research analysts have not engaged in market making activity for the subject Company. Our
sales people, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our
proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing,
among other things, may give rise to real or potential conflicts of interest.
Wallfort Financial Services Ltd and its associates, their directors and employees may (a) from time to time, have a long or short position in, and buy or sell the securities of the subject Company or (b) be engaged in any other
transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject Company or act as an advisor or lender/borrower to the subject Company or
may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.
Disclaimer: This document has been prepared by the Research Division of Wallfort Financial Services Ltd. Mumbai, India (WFSL) and is meant for use by the recipient only as information and is not for circulation. This document is
not to be reported or copied or made available to others without prior permission of WFSL. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this
report has been obtained from sources that are considered to be reliable. However, WFSL has not independently verified the accuracy or completeness of the same. Neither WFSL nor any of its affiliates, its directors or its
employees accept any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should
be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient's particular
circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Either WFSL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have
position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. We may from time to time solicit or
perform investment banking or other services for any Company mentioned in this document.
Wallfort Financial Services Ltd. / its affiliates entities / employees may hold a position in the stock(s) recommended above.
24

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CERA SANITARYWARE Initiating Coverage Report

LIMITED Research Analyst: Anik Mitra

About the Company

Facility & Capacity

• Sanitaryware capacity is 36 lakh pieces per annum

Segment wise performance:

Input cost Input cost dynamics:

P/E FY17 FY18 FY19 FY20 FY21 5 yrs. Avg P/E

ROE FY17 FY18 FY19 FY20 FY21 5 yrs. Avg ROE

ROCE FY17 FY18 FY19 FY20 FY21 5 yrs. Avg ROCE

EV/EBITDA FY17 FY18 FY19 FY20 FY21 5 yrs. Avg EV/EBITDA

P/E 51.01 47.03 48.97 54.18 36.23 29.83 24.61

ROA 10.14% 9.66% 9.05% 7.24% 9.34% 9.86% 10.47%

ROE 17.52% 16.42% 14.34% 11.46% 15.20% 16.41% 17.55%

ROCE 14.27% 13.19% 11.50% 8.79% 11.99% 12.95% 13.92%

BVPS 465.86 539.16 592.88 670.56 756.02 850.95 964.32

EV 5437.42 5441.73 5454.50 5445.41 5374.23 5305.65 5189.06

P/BV 8.94 7.72 7.02 6.21 5.51 4.89 4.32

Debt to Equity 0.08 0.06 0.06 0.05 0.04 0.04 0.04

EV/EBITDA 30.66 27.45 32.96 34.45 24.35 20.24 16.90

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