Motilal Oswal bets on two building material stocks for up to 27% upside on demand recovery hopes

About this update from Cera Sanitaryware Limited

Brokerage firm Motilal Oswal Financial Services, in a note on Wednesday, November 26, said it is positive on the building products sector. Following a slowdown over the past two to three years, it expects the sector, including wood panel, tiles, and bathware, to experience a recovery in the second half of this fiscal. The brokerage said the revival in the second half would be underpinned by low unsold housing inventory and the spillover of project launches from the financial year 2025 into FY26. The building products industry is poised to benefit from the expansion of the real estate sector, increased government focus on infrastructure and housing, growing premiumisation and urbanisation, and the implementation of the Bureau of Indian Standards (BIS) that promotes quality manufacturing, Motilal Oswal said.Building Material Stock Bets Motilal Oswal has initiated coverage on Century Plyboards and Cera Sanitaryware, and re-iterated its "buy" rating on Kajaria Ceramics. The brokerage said low volumes and elevated raw material costs hurt the margins and earnings of building product companies over the last two to three years. Their return ratios also look depressed in many cases due to a surge in capex since FY22. Driven by the expectation of demand improvement from the second half of this fiscal and the end of large-scale capex in the past couple of years, Motilal Oswal said it anticipates these companies to report healthy improvement in earnings and return ratios over FY25-28. It said it sees healthy return potential in Century Ply, followed by Kajaria Ceramics.Century Plyboards India Motilal Oswal has initiated coverage with a "buy" rating on the stock, with a price target of ₹958 per share, showcasing an upside potential of 27%. It believes the company is well-placed to capitalise on a demand pick-up in the housing sector. Century Plyboards is seen as a strong play on the growing interior infrastructure market in India with a comprehensive product portfolio, strong brand recall and a wide distribution network. It said Century Ply commands better pricing in the market due to its premium positioning backed by high brand recall, better channel support and after-sales services. Century Plyboards' revenue, EBITDA and Profit After Tax (PAT) could grow at a Compounded Annual Growth Rate (CAGR) of 15%, 32% and 51% respectively over financial year 2025-2028, after t...

View stock analysis, news, and events for Cera Sanitaryware Limited