Target: ₹5,592

CMP: ₹4,042.25

We re-iterate our Buy rating on Cera Sanitaryware (CRS) led by continued healthy demand environment aided by pick-up in the residential housing market and also from home improvement market.

Our interaction with dealers and management indicates continued demand tailwind even in Q1 in the core segments of sanitaryware and faucetware. Margins should also remain firm going ahead as the company has taken price increase of about 3 per cent in sanitaryware and nearly 5 per cent in faucetware during mid-May, 2022 which should negate raw material price pressures.

Management has guided to double the revenue over the next 3.5 years with margin improvement of at least 50 bps-75 bps YoY in FY23. We expect CRS to witness revenue/PAT CAGR of 17 per cent/27 per cent, respectively, over FY22-24 led by faucetware and sanitaryware segments with continuous high return ratios.

CRS has a strong net-cash balance sheet with healthy growth prospects led by uptick in housing market and increased demand from home improvement market. We continue to like the company for its comprehensive product portfolio, wide distribution reach and strong brand presence.

Maintain Buy with an unchanged Mar’23 target price of ₹5,592 set at 32x PER FY24 (in-line with 1-yr forward five-year average PER).

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