Investment Thesis
• Premiumisation Trends in the Bathware Segment: As consumer aspirations rise, Indian bathrooms are evolving from purely functional spaces into expressions of personal style and comfort. This transition is fueling demand for aesthetically designed, technologically advanced, and premium-quality bathware solutions. Cera, with its extensive portfolio—from designer faucets to luxury sanitaryware and wellness products—is well-positioned to lead this evolution. In preparation, Cera is relaunching its ‘Senator’ brand, targeting a 10% contribution to total sales within three years. The company is also focusing on four niche brands to address distinct market segments, with Luxe and Senator set to strengthen its premium positioning. Plans include installing over 100 Luxe displays by FY26 and expanding Senator’s retail presence from 17 stores to 40–45 stores in the same period. Collectively, Luxe and Senator are expected to contribute around 10% to the company’s revenue over the next three years.
• Robust Demand Tailwinds Driving Growth: Typically, there is a lag of 4–5 years between the initiation of major real estate projects and the demand for bathware products, while smaller projects show demand pick-up in about 2–3 years. Over the past few quarters, Cera has been building a robust order book from such projects, and the results are beginning to reflect in its performance. The project segment, which contributed around 30% to total revenues in FY23, increased to 35% in the following year, and further rose to approximately 38% in FY25. This consistent uptick underscores how Cera has effectively aligned itself with the real estate cycle. Cera’s strategic shift towards the project (B2B) business comes at a time when retail demand remains subdued. The growing contribution of this segment is expected to support the company’s resilience and sustain its growth momentum. A significant part of this progress can be attributed to Cera’s focused expansion in Tier 2 and Tier 3 cities—markets that are emerging as high-potential consumption hubs
• Balanced Growth Strategy Anchored by Projects, New Product Lines, and Margin Focus: Cera has set a revenue target of Rs 2,700 Cr by FY27, aiming to grow ~3% ahead of the industry over the next 3–4 years. However, due to subdued retail demand over the past six quarters, this target will be reviewed in Q1FY26. Despite near-term headwinds, Cera continues to benefit from strong brand recall, customer trust, and a comprehensive product portfolio catering to both mass and premium segments. The company has scaled its retailer loyalty program to over 24,400 retailers, further strengthening its market relationships. In Tier 3 and Tier 4 cities, the polymer products (VAP) segment is expected to see significant growth, supported by strong EBITDA margins (~24–25% initially) and pricing in the Rs 400–Rs 1,000 range. This segment is projected to contribute Rs 100–120 Cr in revenue over the next 3–4 years. To support long-term growth, Cera has acquired 45 acres near its Kadi plant and plans to invest Rs 130 Cr in Greenfield expansion, of which Rs 27 Cr has already been spent on land. Although the new site currently lacks GAIL gas connectivity and will incur higher fuel costs, Phase 1 is set to add 12 Lc units of annual capacity, with further expansion planned in Phase 2.
Valuation & Recommendation
Cera Sanitaryware’s shift of focus during a subdued demand market showcases its ability to adapt to its environment and has helped it maintain its growth. Any revival in demand will lead to robust growth for the organised players, as seen historically. We initiate coverage on the company with a BUY rating and a target price of Rs 8,500/share, based on a multiple of 35x EPS for FY27E. The target price implies an upside potential of 31% from the CMP.
