Cera is the third largest player in the Indian sanitaryware market after Hindustan Sanitaryware (HSIL) and Parryware (EID Parry).
The highlights of the company are:
- Sanitaryware - capacity expansion from 2 million pieces to 2.7 million pieces underway.
- Faucetware - Initial capacity of 2,500 pcs per day, scalable to 10000 pcs. per day
- Bathware & Wellness Range - Primarily imports from China; product ranges like shower cubicles, shower panels etc
Financial Results for FY2011-12:
- Revenues of 320 cr and Net Profit of 31.79cr.
- EPS was 25.32 up from 20.97 a year back.
- Paid a dividend of Rs 3, up from Rs 2.5 in 2010-11.
- EBIDTA margins have been closer to 18-20% consistently.
- RONW% is around 23% for the last three years.
Management/promoter compensation - Father/son duo (CEO and Executive Director respectively) get a salary of 2.5 cr and 1.9 cr, which is a bit high compared to the net profit of the company. Promoters hold 55% of the stock.
Cera has a strong distribution network with 1000 Distributors / Dealers and 10000 retailers.
The company has maintained its strong revenue and profit performance in the 1st quarter of 2012 as well. Revenue was at 90.5 cr (up 40%) and net profit was 9.24 cr (up 34%).
With a reasonably good demand for sanitaryware and Cera's position as the 3rd largest player in the market, added to its efficient use of capital, the company seems to be well placed for future growth.
I am expecting a EPS of between 28-30 for FY12, so expected FY12 end price is 230-360. The CMP of around 315 is already fairly reasonable.
Recommendation: Cera would be a good buy at closer to the 260-280 range. For long term investors, I would suggest to wait for lower levels than buying now, if you are planning to buy in large quantities. For smaller quantities, buying as a SIP would probably bet a good bet for Cera.