Cera Sanitaryware zooms 12%, hits new high on healthy outlook

Last month, rating agencies Care Ratings and Crisil Ratings had reaffirmed the bank facilities and commercial paper of CSL with a stable outlook

Shares of Cera Sanitaryware rallied 12 per cent to hit a new high of Rs 5,699 on the BSE in Tuesday’s intra-day trade on expectations of healthy demand for sanitaryware, faucetware and tiles. The stock surpassed its previous high of Rs 5,050 touched on September 24, 2021. In the past one week, it has zoomed 25 per cent, as compared to a 1 per cent rise in the S&P BSE Sensex.

At 12:50 pm, the stock was trading 9.5 per cent higher at Rs 5,585 on the BSE, as compared to a 1.05 per cent decline in the benchmark index.

Cera Sanitaryware (CSL) is mainly engaged in the manufacturing of ceramic sanitaryware (installed capacity of 30,000 metric tonnes per annum), faucet ware (installed capacity of 21 lakh pieces per annum) and trading of sanitaryware, faucet ware, ceramic tiles, kitchen sinks and bath wellness products (i.e., shower room, steam shower room, shower cubicles and bath tubs). Most of its goods (including traded goods) are sold under the ‘Cera’ brand. Furthermore, CSL has wind-mills and solar power plant with installed power generation capacity aggregating 10.325 MW for meeting its captive power requirement.

Last month, the rating agencies Care Ratings and Crisil Ratings had reaffirmed the bank facilities and commercial paper of CSL with a stable outlook.

"Resolution of labour issues and small price hikes are expected to help Cera register revenue growth of around 12-14 per cent in fiscal 2022 and 8-10 per cent thereafter. Furthermore, operating margin is expected to remain stable at 13-14 per cent, with continued focus on costs," Crisil said in rating rationale.

The ratings continue to reflect the established position of the company in the domestic sanitaryware industry, backed by a diversified revenue profile with presence across various markets in south, east, north and west, it said, adding that the company has diversified into allied building products such as faucets, tiles and wellness products, and benefits from its wide distribution network. Besides, operating efficiency is supported by a mix of manufacturing and outsourcing., the rating agency said.

Meanwhile, Care Ratings siad that the ratings take cognizance of the vast experience of its promoters in the sanitaryware and faucetware business, its strong financial risk profile with steady total operating income (TOI), healthy debt coverage indicators and strong liquidity profile.

"CSL’s TOI is envisaged to grow at a moderate rate during FY22 (refers to the period April 1 to March 31) while maintaining its healthy operating profitability and strong leverage. The ratings are, however, constrained by susceptibility of its profitability margins to volatility in fuel prices, raw material cost and foreign exchange rate fluctuations. The ratings are also constrained by its linkages to the cyclical real estate industry, along with presence of large number of unorganized players in the industry imparting high degree of competitive intensity," the rating agency said in rationale.