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Strong growth momentum to continue, Maintain ADD!

Result Synopsis

Cera Sanitaryware Ltd (CRS), reported a steady topline growth of 6%YoY & 5%QoQ to Rs4.16Bn. The growth was driven by Sanitaryware segment (54% of revenue) which reported a growth of 10%YoY & 5%QoQ. Faucet’s (34% of revenue), registered a growth of 6%YoY & benign 2%growth QoQ. Gross profit margins expanded from 50.7%/53.5% in Q2FY22/Q1FY23 to 55.8% in Q2FY23, largely on account of lower brass prices coupled with favorable product?mix. Owing to this, EBITDA margins improved to 16.3% in Q2FY23 Vs 15.2%/15.8% in Q2FY22/Q1FY23 respectively.

Going ahead, CRS is confident that growth trajectory will continue on account of strong demand owing to home upgradation & home improvement, hence company reiterated their revenue guidance of doubling the top?line from FY22 base in next 40months. Similarly, for margins? management aims to improve EBITDA margins by 50?75bps annually

We continue to remain positive on company’s growth plan & expect sturdy demand coupled with newer capacities will accelerate growth & enable CRS to gain marketshare. We reckon, company’s Revenue/EBITDA/PAT to grow by 19%/21%/25% CAGR over FY22?FY24E. We continue to value the company at P/E(x) of 30x & maintain our ADD rating on the stock.

Result Highlights

* Revenue for the quarter stood at Rs4.16Bn (Vs est of Rs4.10Bn), reporting a 4%YoY & 3%QoQ growth. For H1FY23 revenue stood at Rs8.13Bn, a growth of 31.7%YoY.

* Sanitaryware biz (54% of revenue), reported a growth of 10%YoY & 4%QoQ to Rs2.25Bn. Faucets (34% of revenue), registered 6%YoY & 2%QoQ growth to Rs1.41Bn. Other biz’s revenue stood at Rs500Mn, a 10%YoY degrowth & 14% sequential growth.  

* EBITDA margins came in at 16.3% (better than our expectation of 15%), Vs 15.2%/15.8% in Q2FY22/Q1FY23 respectively. Absolute EBITDA stood at Rs679Mn, reporting a 13.5%YoY & 8%sequential growth. Operating margins for H1FY23 stood at 16.1% Vs 13.1% in H1FY22.   

* Net profit for the quarter stood at Rs511Mn, a growth of 19%YoY & 28%QoQ. PAT margins came in at 12.3% in Q2FY23 Vs 10.9%/10% in Q2FY22/Q1FY23 respectively. H1FY23 net profit stood at Rs910Mn, a growth of 61%YoY.

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