Cera's Revenues Jump 55% In Dec 2012 Quarter
DSIJ Intelligence / 10 Jan 2013
Cera Sanitaryware, which was DSIJ’s pick for the Diwali 2012 portfolio recommendation, has performed as per our expectations during the Dec 2012 quarter. Its revenues rose by 55% to Rs 134 crore, while the net profit came in at Rs 12 crore, marking a 51% growth on a YoY basis. For the first nine months, the company has reported total revenues of Rs 347 crore, with a growth of 50%. Its net profit grew by 43% to Rs 32 crore.
With these strong numbers, the company is well on the path to reporting revenues in excess of Rs 500 crore for FY13 as a whole. In April 2012, the management had given a guidance of Rs 500 crore for the current fiscal. During the elapsed quarter, Cera’s EBITDA margins have declined by 52 basis points to 16.04% due to inventory pile-up, which is still ahead of what some of its industry leader peers saw in the Sept 2012 quarter.
| Particulars | Q3FY13 | Q3FY12 | Growth |
|---|---|---|---|
| Gross Sales | 134.27 | 86.63 | 55.00% |
| Total Income | 128.01 | 82.48 | 55.20% |
| Cost of Materials | 11.33 | 8.71 | 30.16% |
| Purchases And Stock In Trade | 42.15 | 34.43 | 22.40% |
| Employee Benefit Expenses | 14.71 | 10.68 | 37.73% |
| Power And Fuel Expenses | 5.84 | 4.43 | 31.82% |
| Other Expenses | 32.81 | 21.27 | 54.25% |
| Total Expenses | 112.61 | 72.59 | 55.13% |
| EBITDA | 20.53 | 13.66 | 50.31% |
| EBITDA % | 16.04% | 16.56% | -0.52% |
| Depreciation | 2.56 | 1.88 | 36.09% |
| Other Income | 2.00 | 1.62 | 23.05% |
| PBIT | 19.97 | 13.40 | 48.99% |
| Finance Cost | 2.01 | 1.12 | 79.50% |
| PBT | 17.96 | 12.28 | 46.20% |
| Taxes | 5.95 | 4.33 | 37.35% |
| Net Profit | 12.00 | 7.94 | 51.04% |
| EPS | 9.48 | 6.28 | 50.96% |
Cera is the third largest player in the sanitaryware market and is increasing its production capabilities from 2.7 million pieces to 3 million pieces, which is partly funded by debt. As per the company’s Sept quarter balance sheet, its total debt stood at Rs 76 crore and the debt-to-equity ratio was at 0.48x. Due to the rise in its debt, its financing cost has increased by 79% to Rs 2 crore during the Dec quarter. However, this rise in interest cost should not worry investors as the company still maintains an interest cover ratio of nearly 10x.
During the quarter, the company launched a range of HD digital wall and vitrified tiles. This is in keeping with the market trend, as other players in the industry have also launched similar products. Overall, sanitaryware companies are seeing a strong jump in revenues due to the replacement demand. Now, with the RBI hinting at a rate cut in the Mar 2013 quarter, one can also expect a pick-up in real estate demand. This, in turn, will fuel the demand for sanitaryware products. Thus, we expect the growth momentum to continue in CY13.
On the valuations front, the scrip is trading at 12.1x its FY13E earning per share (EPS) of Rs 36.51. During the Sept quarter results analysis, we had set a target price of Rs 436, which has been crossed by the scrip. We now raise our price target to Rs 460 and advise readers to hold the stock in their kitty.
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