Dear Readers,

In the last 3-4 years the stock of Cera Sanitaryware has appreciated considerably from 150 odd levels to current levels of 1,250. That’s a great return by any standards and we are lucky to have identified the stock in Jan 2011 at around 160-170 levels and recommended it to our members.

Now, the question is, can the stock still deliver good returns from current levels?

Well, it may not deliver 650% returns in the next 3 years like it did in the last 3 years; however we believe it still has very good potential to deliver ~20%-30% annualized return over the next few years and is therefore still a good buy in our opinion.

Disclaimer: Our Alpha and Alpha + members have been investing in Cera Sanitaryware since the lows of 160-170 and are still holding the stock. This report is being shared only for the purpose of information; do not construe the same as investment advice. In case you invest in Cera Sanitaryware, please carry out your own due diligence.

The recent results of the quarter ending Jun’14 are a good indication of the growth potential and the pricing power of Cera and the key highlights of the same are as below:

  1. Sales have grown by 28.24% on YoY basis to Rs 162.33 crores.
  2. With the price hike of 4-12% (across product categories) towards the end of Dec’13 quarter, gross margins have expanded to 58.15% and the growth in gross profits is higher at 32% to Rs 94.41 crores.  With the reclamation of gross margins, it’s good to note that Cera has exerted pricing power.
  3. On account of higher employee related expenses and other expenses, there’s 86 bps reduction in EBITDA margins to 14.87% and therefore growth in EBITDA is 21.24% to Rs 24.14 crores.
  4. With lower growth in depreciation cost and interest charges being maintained at same level as last year the Profit before tax is up by 21.75% to Rs 20.78 crores.

Overall, good set of results in terms of sales growth, reclamation of gross margins and profitability.

In the last con-call management talked about targeting 32-35% CAGR in sales for the next 2-3 years; to us at least 25% CAGR seems achievable and as mentioned above we are still recommending members to buy the stock.

The detailed report on the company can be accessed below:

Download Here: Cera Sanitaryware Ltd (NSE Code – CERA) – Katalyst Wealth Alpha Recommendation

 

Best Regards,
Ekansh Mittal
http://www.katalystwealth.com/
Ph.: 0512-6050062, Mob: +91-9818866676
Email: info@katalystwealth.com