Motilal Oswal's research report on Cera Sanitaryware
Cera Sanitaryware (CRS) missed our earnings estimates in 3QFY26 despite clocking a healthy uptick in revenue (up 11% YoY). Revenue growth was driven by 18.1% YoY growth in faucetware (40% revenue mix) and 6.4% YoY growth in sanitaryware (48% revenue mix). Elevated brass prices, inadequate price hikes, an increase in trade discounts, high publicity costs, and new brand launch-related costs hurt gross margin and thus EBITDA margin (10.2%; down 299bp YoY/353bp QoQ).
Outlook
Despite muted earnings CAGR, we expect CRS to generate a strong FCF of over INR5b over FY25-28 with the cash surplus of ~INR10b in FY28. While this could suppress RoE to ~17%, a high RoIC (45%+) is likely to sustain. On muted earnings CAGR, we retain our NEUTRAL rating on CRS with a TP of INR5,607, based on 25x Sep’27 P/E.
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Cera Sanitaryware_06022026_Motilal Oswal