CERA - Cera Sanitaryware Ltd. Share Price

Cera Sanitaryware Limited presented a cautious yet optimistic outlook during its Q4 FY25 earnings conference call. The company reported revenue from operations of Rs. 578 crore in Q4, a 5.7% increase year-on-year, despite prevailing softness in consumer demand. The EBITDA for the quarter stood at Rs. 121 crore, yielding an improved margin of 20.4%. The management highlighted key growth segments, with Faucetware achieving 9.6% growth through strong demand, while Sanitaryware faced subdued demand but maintained optimism due to structural drivers like urbanization.

Forward-looking points included:

1. The company anticipates that the B2B segment's contribution to revenues will continue increasing, having risen to 40% in Q4, up from 35% in Q4 FY24.
2. Cera has launched approximately 431 new SKUs during FY25, reflecting its commitment to innovation and product expansion.
3. A total CAPEX of Rs. 22.84 crore was incurred in FY25, with plans for Rs. 24 crore in FY26, primarily focused on routine investments and brand development.
4. The firm is set to establish a dedicated team for the Senator brand, aiming to enhance its premium offerings.
5. Management expressed confidence in achieving a revenue target of Rs. 2,900 crore by FY27, conditional on market recovery, particularly in the retail sector.
6. The retail experience centers expanded to 13 locations, and 40 to 45 new Senator stores are planned for FY26.
7. Marketing expenses were projected at Rs. 54 crore for FY25, with a strong focus on digital campaigns to enhance brand engagement, particularly among younger demographics.

Overall, while acknowledging current market challenges, Cera is positioning itself for growth through strategic investments, innovation, and a strong focus on premiumization.

Praveen Sahay: "Good margin improvement in the quarter. What is the way forward regarding margin sustainability, and what specific cost management measures led to this improvement?"

Vikas Kothari: "The margins have improved, generally ranging from 15% to 16%. We've seen about a 1.5% increase this quarter due to a 0.1% improvement in gross margins and a notable 0.5% from publicity savings, with additional savings of 0.9% from production overheads and sales and marketing expenses. We anticipate margins will remain within this range moving forward."

Praveen Sahay: "What has caused the increase in working capital, especially receivables, and is it linked to our institutional business growth?"

Deepak Chaudhary: "Inventory days have risen to 79, while receivables increased to 44 days, largely due to changes in our credit policy rather than the project business. Receivables are consistent with previous periods, and we expect this adjustment to stabilize."

Lakshminarayan KG: "Can you explain the sustained slowness in demand across your segments?"

Deepak Chaudhary: "The slowness primarily affects the retail sector. Project sales have increased, now comprising about 40% of total sales, while retail demand has lagged due to various factors, including regional issues and last year's elections."

Moksh Ranka: "With freight rates down, is the oversupply issue in the tile segment resolved?"

Vikas Kothari: "The tile segment contributes around 10% of revenue, though our focus remains on sanitary and faucetware. We have a zero-inventory model, and tiles are offered as part of a complete solution whenever relevant."

Rudraksh Gupta: "What are the export opportunities you see and how significant is this for future growth?"

Deepak Chaudhary: "Exports currently make up about 3.52% of revenues. While we see potential for growth, we don't anticipate it reaching double digits in the short term due to market conditions."

Rudraksh Gupta: "Are you still confident in achieving the guided revenue of Rs. 2,900 crore by FY27?"

Vikas Kothari: "While market conditions have been subdued, our project pipeline remains strong. We can achieve our targets if retail demand improves, relying on our strategic initiatives to outperform market growth."

Sonali Salgaonkar: "Why is overall volume growth slower across the industry, despite real estate activity?"

Deepak Chaudhary: "There's been some pricing pressure and oversupply, which has led to higher discounts. As a result, we've maintained profitability through efficiency but expect stronger project demand as the market recovers."

Pranav Mehta: "Can you provide the revenue breakup for Q4 FY25 compared to Q4 FY24?"

Vikas Kothari: "In Q4 FY25, revenues were Sanitaryware: Rs. 269 crore, Faucetware: Rs. 222 crore, Wellness: Rs. 16 crore, and Tiles: Rs. 53 crore. In Q4 FY24, Sanitaryware was Rs. 273 crore, Faucetware: Rs. 202 crore, Wellness: Rs. 10.96 crore, and Tiles: Rs. 50.7 crore."

Akshay Chedda: "What was the B2B contribution for FY25, and do you expect to shift that ratio upwards?"

Deepak Chaudhary: "B2B constituted about 38% of our revenues in FY25. While retail remains constant, project growth depends on improving retail demand, ideally maintaining a balanced ratio."

Shubham Padhiar: "How do you plan to differentiate Cera as a premium brand in the market?"

Vikas Kothari: "We're introducing premium brands, Cera Luxe and Senator, which will contribute around 10% of our revenues. A dedicated team and flagship stores are being established to enhance visibility and competitiveness in this segment."