BUY CMP 2125.00 Target Price 2330.00 CERA SANITARYWARE LTD Result Update (PARENT BASIS): Q1 FY16 JULY 15 th 2015 ISIN: INE739E01017 Index Details Stock Data Sector Furniture & Furnishing BSE Code 532443 Face Value 5.00 52wk. High / Low (Rs.) 2952.05/1200.00 Volume (2wk. Avg.) 12000 Market Cap (Rs. in mn.) 27637.75 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales 8216.68 9531.35 10865.74 EBITDA 1241.16 1438.89 1631.38 Net Profit 676.64 784.86 880.04 EPS 52.03 60.35 67.66 P/E 40.85 35.21 31.41 Shareholding Pattern (%) 1 Year Comparative Graph SYNOPSIS Cera Sanitaryware Ltd is a pioneer of the first sanitary ware segments in India launching innovative designs & water saving products. During the Q1 FY16, the company s net profit jumps to Rs. 156.66 mn against Rs. 136.32 mn in Q1 FY15, an increase of 14.92%. Revenue for the quarter rose by 19.67% to Rs. 1942.63 mn from Rs. 1623.33 mn, when compared with the prior year period. During the quarter, EBIDTA is Rs. 294.33 mn as against Rs. 255.19 mn in the corresponding period of the previous year, grew by 15.34%. During Q1 FY16, PBT was up by 15.48% to Rs. 239.96 mn as against Rs. 207.80 mn in Q1 FY15. EPS of the company stood at Rs. 12.05 a share during the quarter, registering 11.81% increase over previous year period. CERA SANITARYWARE LTD S&P BSE SENSEX Net Sales and PAT of the company are expected to grow at a CAGR of 22% and 17% over 2014 to 2017E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Cera Sanitaryware Ltd 2125.00 27637.75 52.03 40.85 7.86 125.00 Kajaria Ceramic Ltd 772.85 61584.50 21.19 36.57 9.31 200.00 Asian Granito India Ltd 112.50 2542.80 6.41 17.57 0.86 0.00 Somany Ceramics Ltd 420.00 16353.70 11.42 36.87 6.17 100.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results Updates- Q1 FY16, Months Jun-15 Jun-14 % Change Net Sales 1942.63 1623.33 19.67% PAT 156.66 136.32 14.92% EPS 12.05 10.77 11.81% EBITDA 294.33 255.19 15.34% The company s net profit jumps to Rs. 156.66 million against Rs. 136.32 million in the corresponding quarter ending of previous year, an increase of 14.92%. Revenue for the quarter rose by 19.67% to Rs. 1942.63 million from Rs. 1623.33 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 12.05 a share during the quarter, registering 11.81% increase over previous year period. Profit before interest, depreciation and tax is Rs. 294.33 million as against Rs. 255.19 million in the corresponding period of the previous year. Break up of Expenditure Break up of Expenditure Cost of Material Consumed Purchase of Stock in Trade Employee Benefit Expenses Depreciation & Amortization Expense Rs. in Mn Q1 FY16 Q1 FY15 % Change 158.33 168.50-6% 675.18 611.05 10% 258.61 227.92 13% 36.81 33.47 10% Power & Fuel 62.37 70.99-12% Other Expenses 462.16 403.81 14%
COMPANY PROFILE Cera Sanitaryware Ltd was launched in the year 1980 is a pioneer in the sanitary ware segment in India. The first sanitary ware company to use natural gas, Cera has been on the forefront of launching a versatile color range and introducing the bath suite concept. It also launched innovative designs and water-saving products. The twinflush model launched in India by Cera for the first time, reduces the water needs of households considerably. WCs designed to flush in just 4 liters of water is another notable innovation by Cera. Cera Sanitaryware incorporated in the year 1998 is a pioneer in the sanitary ware segment in India. The company has launched a wide range of bath suite concept. Cera Sanitaryware sells its products through Cera Bath Studios, which provides consumers, architects and interior designers a full view of ranges of wash basins, shower panels, shower cubicles, bath tubs, shower temples, whirlpools, cp fittings etc. Cera Bath Studios has pan- India presence, are located at Ahmedabad, Bangalore, Chandigarh, Kolkata, Cochin and Hyderabad, Mumbai. Manufacturing Unit Cera Sanitaryware manufacturing facilities are located at Kadi, Gujarat. Products The company has providing the following products for various purposes. Sanitary ware Faucets Wellness Kitchen Sinks Mirrors Personal Care Green Products
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31, 2014-2017E SOURCES OF FUNDS Shareholder's Funds FY14A FY15A FY16E FY17E Share Capital 63.27 65.03 65.03 65.03 Reserves and Surplus 2176.40 3452.04 4236.90 5116.94 1. Sub Total - Net worth 2239.67 3517.07 4301.93 5181.97 Non Current Liabilities Long term Borrowings 90.00 142.39 163.75 183.40 Deferred Tax Liabilities 201.98 278.24 322.76 364.72 Other Long term Liabilities 79.11 92.69 102.89 113.17 Long term Provisions 274.75 255.89 268.68 282.12 2. Sub Total - Non Current Liabilities 645.84 769.21 858.08 943.41 Current Liabilities Short term Borrowings 333.61 450.20 517.73 579.86 Trade Payables 376.88 486.55 578.99 660.05 Other Current Liabilities 760.73 998.73 1148.54 1274.88 Short Term Provisions 175.34 220.61 249.29 274.22 3. Sub Total - Current Liabilities 1646.56 2156.09 2494.55 2789.01 Total Liabilities (1+2+3) 4532.07 6442.37 7654.56 8914.38 APPLICATION OF FUNDS Non-Current Assets Fixed Assets Tangible assets 1517.03 2146.80 2554.69 2963.44 Capital Work in Progress 52.03 76.55 94.92 112.01 a) Sub Total - Fixed Assets 1569.06 2223.35 2649.61 3075.45 b) Non-current investments 0.01 0.01 0.02 0.02 c) Long Term loans and advances 283.03 320.17 353.79 385.63 1. Sub Total - Non Current Assets 1852.10 2543.53 3003.42 3461.10 Current Assets Current Investment 121.30 477.56 553.97 631.53 Inventories 1045.76 1258.91 1472.92 1699.76 Trade receivables 1066.22 1612.23 1999.17 2415.12 Cash and Bank Balances 307.10 295.29 307.10 325.53 Short-terms loans & advances 134.60 252.19 314.84 377.81 Other current assets 4.99 2.66 3.14 3.55 2. Sub Total - Current Assets 2679.97 3898.84 4651.14 5453.28 Total Assets (1+2) 4532.07 6442.37 7654.56 8914.38
Annual Profit & Loss Statement for the period of 2014 to 2017E Value(Rs.in.mn) FY14A FY15A FY16E FY17E Description 15m 12m 12m 12m Net Sales 6636.92 8216.68 9531.35 10865.74 Other Income 61.52 65.87 71.14 75.41 Total Income 6698.44 8282.55 9602.49 10941.15 Expenditure -5687.56-7041.39-8163.60-9309.76 Operating Profit 1010.88 1241.16 1438.89 1631.38 Interest -64.42-77.29-88.11-99.56 Gross profit 946.46 1163.87 1350.78 1531.82 Depreciation -122.47-154.61-179.35-204.46 Profit Before Tax 823.99 1009.26 1171.43 1327.36 Tax -304.94-332.62-386.57-447.32 Net Profit 519.05 676.64 784.86 880.04 Equity capital 63.27 65.03 65.03 65.03 Reserves 2176.40 3452.04 4236.90 5116.94 Face value 5.00 5.00 5.00 5.00 EPS 41.02 52.03 60.35 67.66 Quarterly Profit & Loss Statement for the period of 31 st Dec, 2014 to 30 th Sep, 2015E Value(Rs.in.mn) 31-Dec-14 31-Mar-15 30-Jun-15 30-Sep-15E Description 3m 3m 3m 3m Net sales 2092.94 2504.42 1942.63 2292.30 Other income 14.90 22.20 11.94 12.89 Total Income 2107.84 2526.62 1954.57 2305.20 Expenditure -1796.31-2143.56-1660.24-1965.88 Operating profit 311.53 383.06 294.33 339.32 Interest -21.82-24.54-17.56-19.67 Gross profit 289.71 358.52 276.77 319.65 Depreciation -41.93-44.77-36.81-39.75 Profit Before Tax 247.78 313.75 239.96 279.90 Tax -86.17-92.57-83.31-93.21 Net Profit 161.61 221.18 156.66 186.69 Equity capital 63.27 65.03 65.03 65.03 Face value 5.00 5.00 5.00 5.00 EPS 12.77 17.01 12.05 14.35
Ratio Analysis Particulars FY14A FY15A FY16E FY17E EPS (Rs.) 41.02 52.03 60.35 67.66 EBITDA Margin (%) 15.23% 15.11% 15.10% 15.01% PBT Margin (%) 12.42% 12.28% 12.29% 12.22% PAT Margin (%) 7.82% 8.23% 8.23% 8.10% P/E Ratio (x) 51.81 40.85 35.21 31.41 ROE (%) 23.18% 19.24% 18.24% 16.98% ROCE (%) 42.55% 33.96% 32.47% 30.88% Debt Equity Ratio 0.19 0.17 0.16 0.15 EV/EBITDA (x) 26.60 22.12 19.08 16.82 Book Value (Rs.) 176.99 270.42 330.76 398.43 P/BV 12.01 7.86 6.42 5.33 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs.2125.00, the stock P/E ratio is at 35.21 x FY16E and 31.41 FY17E respectively. Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.65.30 and Rs.67.66 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 22% and 17% over 2014 to 2017E respectively. On the basis of EV/EBITDA, the stock trades at 19.08 x for FY16E and 16.82 x for FY17E. Price to Book Value of the stock is expected to be at 6.42 x and 5.33 x for FY16E and FY17E respectively. We recommend BUY in this particular scrip with a target price of Rs.2330.00 for Medium to Long term investment.
INDUSTRY OVERVIEW The Ceramic Tile Market in India is showing remarkable growth owing to the booming real estate sector along with the rising disposable income of the consumers. Consumers are becoming style conscious and this aesthetic sense of the consumers is leading to its increased consumption. Moreover, the user industries of ceramic tiles are also growing steadily due to its price competitiveness compared to marble leading to its increased demand from these sectors. The Indian home and furnishing market is pegged at about $20 billion (Rs 1.2 lakh crore), of which the furniture segment accounts for about half. As about 90 per cent of the market is unorganised, it is an attractive avenue for online players. Also, margins stand at 10-25 per cent, making it competitive and on a par with the apparel space, say industry insiders. In relatively developed markets such as China and Brazil, the share of the home-and-furniture category in the overall e-commerce space is estimated at 15-20 per cent, encouraging numbers for Indian e-tailers. Outlook The spread of roads, telephones and electricity is helping urban centres expand. As wage growth remains strong, new urban consumption goods like tiles are expected to report robust demand. Despite a robust growth by the organized tiles sector over the past years, per capita consumption of ceramic tiles in India is only a seventh of Brazil s, a sixth of China s and a third of Indonesia s. About 80-85% of tile demand is driven by new housing or first-time users, while the balance is derived from replacement. Interestingly, new housing demand is expected to emerge from non-metro locations (smaller urban centres, Tier-II and III towns) while replacement demand is expected to be largely a metro phenomenon. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
Firstcall India Equity Research: Email info@firstobjectindia.com C.V.S.L.Kameswari Pharma & Diversified U. Janaki Rao Capital Goods B. Anil Kumar Auto, IT & FMCG M. Vinayak Rao Diversified G. Amarender Diversified Firstcall Research Provides Industry Research on all the Sectors and Equity Research on Major Companies forming part of Listed and Unlisted Segments For Further Details Contact: Tel.: 022-2527 2510/2527 6077 / 25276089 Telefax: 022-25276089 040-20000235 /20000233 E-mail: info@firstobjectindia.com www.firstcallresearch.com