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Margins Recovery Ahead; Growth Momentum Intact

We maintain our ‘BUY’ rating on Cera Sanitaryware (CRS). The company reported healthy revenue growth in Q2FY27, supported by improving demand trends, distribution expansion and market share gains across focus markets. Management remains confident of surpassing its FY27 revenue growth guidance of 20%, while maintaining its EBITDA margin guidance of 13–14%. EBITDA margin improved sequentially to 12.2% in Q2FY27, supported by cost optimisation, process improvements and operating efficiencies, despite continued pressure from elevated brass, gas and outsourcing costs. In H1FY27, CERA has implemented cumulative price hikes of 12% in sanitaryware and 24% in faucetware to offset higher input costs, with benefits expected to flow through from late Q3FY27. Management expects profitability to improve progressively in H2FY27, supported by pricing actions, healthy volume growth and operational efficiencies. We tweak our earnings estimates for FY28/FY29. We estimate revenue/EBITDA/PAT CAGR of 15.0%/17.5%/19.7% over FY26-29E. Maintained ‘BUY’ rating with a TP to Rs6,868, based on 27x Sep’28 earnings.

Q2FY27 financial performance:

Revenues grew by 27.4% YoY at Rs 6.0bn (PLe: Rs 5.7bn). Sanitaryware/Faucetware/Tiles/Wellness grew by 21.9%/36.9%/15.8%/27.4% YoY to Rs 2.7bn/2.6bn/603mn/121mn. EBITDA grew by 9.1% YoY to Rs 733mn (in-line with our est) and EBITDA margin contracted by ~200bps YoY to 12.2%. (PLe:12.7%). PBT grew by 1.1% YoY to Rs 730mn (PLe: Rs 797mn). Adj. PAT remained flat YoY to Rs 561mn (PLe: Rs 596mn).

H1FY27 financial performance:

Revenues grew by 23.7% YoY at Rs 10.9bn. Sanitaryware/Faucetware/Tiles/Wellness grew by 17.3%/30.4%/22.6%/60.9% YoY to Rs 5.0bn/4.5bn/1.1bn/218mn. EBITDA grew by 7.1% YoY to Rs 1.3bn and EBITDA margin contracted by ~180bps YoY to 11.8%. PBT grew by 4.3% YoY to Rs 1.4bn. Adj. PAT declined by 1.7% YoY to Rs 1.0bn.

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