Cera Sanitaryware - Book Partial Profit

Dalal Street Investment Journal had recommended Cera Sanitaryware to our investors in Issue No 17 dated August 2-15, 2010 when the scrip was trading at Rs 264.

DSIJ's recommendation was based on various factors such as the company’s consistent topline and bottomline growth in ten years, notable dividend payment history, announce-ment of a bonus issue of 1:1, and last but not the least, the expansion plans in its sanitaryware business. Further, it was also expected to announce an acquisition in the European markets.

After our recommendation the scrip has performed to our expectations and on an ex-bonus basis is trading at Rs 168, thus providing an appreciation of 27% from the recommended price. Our suggestion is that investors should book partial profit (50%) at its current levels and hold the rest till the next quarter.

On the financial front, Cera Sanitaryware has performed well again. For 9MFY11, it has posted a topline of Rs 167.42 crore and a bottomline of Rs 19.32 crore as compared to Rs 132.93 crore and Rs 13.35 crore in 9MFY10. The trailing four-quarter EPS stands at Rs 20.50, translating into a P/E of 8.20 times. This is much better than the other sanitaryware companies.

Going ahead we feel that as the company expands it will perform even better. However, since the market is quite volatile it would be advisable to take some profit off the table. Hence, book partial profit and hold the rest for the next one quarter.