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Cera Sanitaryware: Decent Performance in Turbulent Times - Views on News from Equitymaster
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  • Jun 29, 2017 - Cera Sanitaryware: Decent Performance in Turbulent Times

Cera Sanitaryware: Decent Performance in Turbulent Times
Jun 29, 2017

We present herewith result analysis of Cera Sanitaryware (Cera) for the quarter and year ended March 2017.

Performance summary
  • Revenues grew by 12.8% YoY during the quarter ended March 2017.
  • Operating margins contracted marginally by 0.8% YoY to 15.9% during the quarter and the net profits grew by 8.4% YoY.
  • For the full year, revenues and profits grew by 10% and 21.4% YoY respectively.
  • The company recommended a final dividend of Rs 12 per share for the fiscal year ended 2017.

    Standalone financial performance
    (Rs m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Gross Sales 2,888 3,257 12.8% 9,606 10,568 10.0%
    Less: Excise Duty 130 144 11.3% 434 476 9.7%
    Net Sales 2,758 3,112 12.8% 9,172 10,092 10.03%
    Expenditure 2,277 2,595 14.0% 7,760 8,422 8.5%
    Operating profit (EBDITA) 481 517 7.5% 1,413 1,670 18.2%
    EBDITA margin (%) 16.7% 15.9%   14.7% 15.8%  
    Other income 36 40 10.2% 100 104 4.4%
    Depreciation 42.4 58.6 38.1% 163.2 181.2 11.0%
    Interest 14.24 9.02 -36.6% 54.62 34.40 -37.0%
    Profit before tax 461 489 6.2% 1,295 1,558 20.4%
    Tax 163 166 2.2% 460 545 18.5%
    Effective tax rate 35% 34%   36% 35%  
    Profit after tax/(loss) 298 323 8.4% 835 1,013 21.4%
    Net profit margin (%) 10.3% 9.9%   8.7% 9.6%  
    No. of shares (m)         13.0  
    Diluted earnings per share (Rs)*         77.9  
    Price to earnings ratio (x)         37.7  

    (*On a trailing 12-month basis & excluding exceptional Items)

  • What has driven performance in 4QFY17?

  • Cera's revenues grew by 12.8% YoY during the quarter ended March 2017. The company recovered well from the impact of demonetization as witnessed in the third quarter, wherein the sales grew at a snail's pace of 2% YoY.
  • Operating profits grew by 7.5% YoY during the quarter. An increase in other expenses led to margins contracting by 0.8% to 15.9%. Fuel prices which accounted for 3% of net sales in 4QFY16, have reduced to a mere 1% in 4QFY17. Lower fuel prices on account of lower prices for gas will help the company to maintain the margins at the current level.
  • Cera's net profits grew by 8.4% YoY during the quarter, in line with the operating performance.
  • During the year, the company commenced its Joint Venture (JV) with Anjani Tiles in Andhra Pradesh (AP). As part of this JV, Cera will purchase tiles from Anjani at a cost plus model. Thereafter, the company will leverage on its distribution network to market these tiles. The revenues from this JV for the full year came in at Rs 0.65 billion, a tad lower than the company's expectation of Rs 1 billion. Though it is imperative to note that the expectations were not met on account of the impact of demonetization in the third quarter.
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