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CERA Sanitaryware Ltd – Stellar set of Q2FY15 results | Rub‐off impact on HSIL
Cera Sanitaryware Ltd reported strong set of Q2FY15 results. Net sales of the company stood at Rs 1996
mn against Rs 1588 mn in Q2FY14, implying a growth of 25.7% yoy. EBITDA grew 43.5% yoy to reach Rs 276
mn in Q2FY15 from Rs 193 mn in Q2FY14. EBITDA margin expanded 172 bps yoy to reach 13.8% in Q2FY5
from 12.1% in Q2FY14. This was primarily due to lower raw material (47.2% in Q2FY15 vs. 48.4% in
Q2FY14) and power cost (3.7% in Q2FY15 vs 4.8% in Q2FY14). Net profit grew 48.3% yoy to reach Rs 157.5
mn in Q2FY15 from Rs 106 mn in Q2FY14. Lower than proportionate growth in interest and depreciation
costs (5.3% and 11.3% yoy respectively) against EBITDA growth led to net margin expansion of 120 bps yoy.
Net margin expansion was lower than EBITDA margin expansion due to 10.7% decline in other income.
Consequently, net profit margin expanded to 7.9% in Q2FY15 against 6.7% in Q2FY14. EPS of the company
stood at Rs 12.4 in Q2FY15 against Rs 8.34 in Q2FY14.
Our take and Valuation
At CMP of Rs 1706, the stock trades at PE of 31.9x and 26.8x its FY15E and FY16E Bloomberg consensus
earnings of Rs 53.57 and Rs 63.59 per share. The company beat the street estimates on profit front. In our
opinion, this is on account of savings in power and raw material costs. The company is in the process of
setting up wind and solar power to lower power costs. Lower material cost could be attributed to focus on
value added products. We do not have any formal rating on the stock.
Rub‐off impact on HSIL
However, we expect the same trend to be visible in HSIL – building product segment. HSIL has also been
focussing on value added products and lowering its power costs by usage of alternate fuels. It has been
improving its EBITDA margin of building products which stood at 22.8% in FY14 against 20.5% in FY13. At
CMP of Rs 373, HSIL trades at PE of 22.8x and 14.6x FY15E and FY16E earnings of Rs 16.4 and Rs 14.6 per
share. We maintain our positive stance on HSIL with a BUY rating and SOTP based target price of Rs 425.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
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CERA Sanitaryware Ltd – Stellar set of Q2FY15 results | Rub‐off impact on HSIL
Cera Sanitaryware Ltd reported strong set of Q2FY15 results. Net sales of the company stood at Rs 1996
mn against Rs 1588 mn in Q2FY14, implying a growth of 25.7% yoy. EBITDA grew 43.5% yoy to reach Rs 276
mn in Q2FY15 from Rs 193 mn in Q2FY14. EBITDA margin expanded 172 bps yoy to reach 13.8% in Q2FY5
from 12.1% in Q2FY14. This was primarily due to lower raw material (47.2% in Q2FY15 vs. 48.4% in
Q2FY14) and power cost (3.7% in Q2FY15 vs 4.8% in Q2FY14). Net profit grew 48.3% yoy to reach Rs 157.5
mn in Q2FY15 from Rs 106 mn in Q2FY14. Lower than proportionate growth in interest and depreciation
costs (5.3% and 11.3% yoy respectively) against EBITDA growth led to net margin expansion of 120 bps yoy.
Net margin expansion was lower than EBITDA margin expansion due to 10.7% decline in other income.
Consequently, net profit margin expanded to 7.9% in Q2FY15 against 6.7% in Q2FY14. EPS of the company
stood at Rs 12.4 in Q2FY15 against Rs 8.34 in Q2FY14.
Our take and Valuation
At CMP of Rs 1706, the stock trades at PE of 31.9x and 26.8x its FY15E and FY16E Bloomberg consensus
earnings of Rs 53.57 and Rs 63.59 per share. The company beat the street estimates on profit front. In our
opinion, this is on account of savings in power and raw material costs. The company is in the process of
setting up wind and solar power to lower power costs. Lower material cost could be attributed to focus on
value added products. We do not have any formal rating on the stock.
Rub‐off impact on HSIL
However, we expect the same trend to be visible in HSIL – building product segment. HSIL has also been
focussing on value added products and lowering its power costs by usage of alternate fuels. It has been
improving its EBITDA margin of building products which stood at 22.8% in FY14 against 20.5% in FY13. At
CMP of Rs 373, HSIL trades at PE of 22.8x and 14.6x FY15E and FY16E earnings of Rs 16.4 and Rs 14.6 per
share. We maintain our positive stance on HSIL with a BUY rating and SOTP based target price of Rs 425.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
LINK
http://www.indianivesh.in/Admin/Upload/635483571946478750_NiveshDaily%20October%208,%202014.pdf
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