Cera Sanitaryware Ltd - Rs 128.00

Established in 1980, Cera Sanitaryware Ltd (CSL) is a pioneer in the sanitaryware segment and currently the third largest company in the organised sector with over 20% market share in India. It is the first company to launch innovative designs with a versatile colour range in sanitary ware segment apart from introducing the bath suite concept. The twin flush cistern model which saves upto 50% of water was launched by CSL only. In the last couple of years, company has evolved itself into a total bathroom solutions provider, from a mere sanitaryware manufacturer. It deals in several products from simple ceramic wash basins to ultra hi-tech shower temple. Broadly it has segmented its product profile into five categories - sanitaryware, bath fittings, kitchen sinks, shower temples & whirlpool. Presently it boasts of manufacturing huge range of WC, squatting pan, plastic cisterns, seat covers, bidets, Wash basins, urinals, kitchen sinks, taps, whirlpool, bath tubs etc. In line with todays high technology CSL also provides automatic electronic flushing system, automatic water flow sensor tap, automatic hand dryers/soap dispensers, & perfume sprayer. Especially for the premium class it has sophisticated and elegant shower temples with Jacuzzi feature, shower cubicles & shower panels. It also has a strategic tie-up with Sanitec group, an Italian designer sanitaryware for importing premium sanitaryware and marketing it in India under their brand name - Pozzi Ginori. In short, it has a mix of products that would cater to all types of consumer from lower middle class to elite class. Currently, CSL derives 40% of revenue from institutional sales and the balance 60% comes from retail sales.

CSL’s manufacturing in Kadi, Gujarat uses technology from Germany, Italy, UK and Australia, to produce products that suits Indian conditions. Incidentally, this is the first plant that uses natural gas as feedstock thereby reducing the cost of production considerably. It has a direct connection form GAIL apart from getting natural gas on very cheap rate directly from the ONGC oil fields wherein others are getting imported LNG which is three times costlier. Its plant is equipped with captive power plants and wind turbines. To fulfill the rising demand, company expanded its capacity from 16,500 MTPA (1.3 million pieces) to 24,000 MTPA (2 million pieces) in Oct’07 only. It distribution network comprises 400 dealers, 4000 retailers, 9 depots and 14 zonal offices across the country. To boost up its retail sales, company came up with novel idea of setting up live CERA bath studio where consumers, architectures, interior designers etc can actually see how the premium products will look, feel and function in their homes. With eight such studios across India, company is now putting up Cera Bath Galleries with its retail partners. In coming years, both such formats will be replicated in several other cities and towns. To maintain its growth momentum CSL is planning a major foray into taps as there is only one strong Indian brand, followed by mediocre brands. Secondly, company is also contemplating to enter premium tile segment, through outsourcing.

With increased production capacity, CSL is also looking at export market more seriously and intends to increase its share from 5% currently. For distant future it plans to further increase the capacity to 3 million pieces i.e. approx 35,000 mtpa with an investment of Rs 30 crore by 2010. Apart from ongoing boom in housing, hospitality & retail segment which is expected to sustain for few more years, CSL will also be benefited from the replacement and up-gradation market. With a strong foothold in western and northern India, company is taking initiatives to increase its presence in central and southern India. And having created such a strong brand and goodwill, it won’t be difficult for CSL to have a pan India presence. Financially, CSL has been doing satisfactorily as it registered 20% and 10% growth in sales and net profit to Rs 128 and Rs 10 cr respectively for FY08. It posted decent result for the Q1FY09 as well. Accordingly it can clock a turnover of Rs 160 cr and PAT of Rs 11 cr i.e. EPS of Rs 18 on a tiny equity of Rs 3.10 cr having face value as Rs 5/- per share. Investors can accumulate at declines for a price target of Rs 180 in 12~15 months.

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