Friday, 9 November 2012

Incredible Stocks - Cera Sanitaryware


The need for good sanitation is as old as the human race. It is even said that the proof of a clean house is its clean WC. And indeed in recent times, if the number of ads on print and electronic media is anything to go by, a well-designed bath and WC has become a style-statement in itself.

In the last five years, Indian markets have witnessed a tremendous increase in demand of good and branded sanitaryware. The reason for this can be traced to the better standards of living that the Indian middle-class is aiming for.
Coupled with disposable incomes leading to the affordability of branded sanitaryware items, the demand for good, hygenic and stylish baths, WC etc. have increased and will increase in the coming years owing to the demand for better housing and living standards in general. It is on such sectors that we have to keep a continuous watch. For, it is here that we have a high chance of finding some good stocks to invest for the long term.

The industry as such is not yet saturated. Branded sanitation has a low penetration of only 40% in India. Of this 93% is in the new segment and a low figure of 7% in the replacement segment. This goes to show the potential growth that the industry can have in India. The different players are still gearing-up to meet the increased and expected future demand for good sanitaryware. The need for stylish baths and WC in places like hotels, malls, commercial and office complexes etc., in-addition to housing sector, is also evident. Rapid urbanisation, increased awareness about health and hygene, better lifestyle and the present low penetration of branded sanitation products presents a good opportunity for growth in the coming years for this industry.

Cera Sanitaryware which has a market share of more than 20% and presently placed third as per the market cap is being pointed as a good stock investment option by analysts.

The company which is based in Gujarat has a whole array of bathroom products. Let's take a bird's eye view of the parameters of the company here :



20122011201020092008CAGR%
Sales (in Cr)320242.95191.37159.22128.0525
Profit (in Cr)3226.5419.6113.111033.36
OPM%16.6718.8118.8418.5016.61
ROCE%29.0729.6028.0323.7119.10
ROE%2323.8022.1618.5617.08
Debt/Equity0.300.340.310.520.67
Interest Coverage
Ratio
13.6916.2612.836.425.90

The CMP at the time of the post was Rs. 384.70




The stock is currently trading at PE of 12 (approx)  and a PE of 11.50 FYE2013 and  10.55 FYE2014.

Cera has grown its sales at 25% CAGR in the last 5 yrs. It is the fastest growing sanitaryware company in India. the re-rating of this company is expected anytime resulting in PE expansion.

The company has exhibited a good control over its D/E ratio and has also maintained good return ratios, as can be seen from the table above.

The company has a production capacity of 2.7 million units presently and planning to increase it to 3 million in the next year and a half. Cera has recently diversified its portfolio to include branded tiles and is expecting a revenue of Rs 20Cr this fiscal from the tiles segment alone. The company has posted a sharp growth and has grown its Profit after Tax by 44% in september 2012 qtr itself.

The company has spent a good amount in marketing. Its marketing cost has grown at 36% CAGR over FY2008-12. Just to see where this spending has gone, the company has launched Cera Style Studios in various cities showcasing their products in a live bathroom setting for the consumers to have a Cera experience. The company also launched Cera Style Galleries in Exclusive Cera Retail Centres across the country to complement the Cera Style Studios. All this, in addition to traditional advertising media. This is definitely going to increase its visibility to its consumers and is like a foundation for good returns.

Looks like another great stock up for grabs.



5 comments:

  1. Good blog with useful information. Thanks for Sharing. Cera, The best Sanitary ware Company in India has a wide range of bathroom accessories. Shop luxury bath accessories from leading bathroom products. always available here Cera Bathroom Fittings | Bathroom Accessories Online

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  2. Thanks for sharing about sanitary ware, sanitary ware.

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