Cera Sanitaryware Share Price Target at Rs 6,437: BOB Capital Markets
BOB Capital Markets has maintained its BUY rating on Cera Sanitaryware with a target price of Rs 6,437, implying about 34% upside from the Nov. 5 closing price of Rs 4,802. The bathware maker's July-September consolidated revenue rose 23.6% to Rs 603 crore, about 13% ahead of the brokerage's estimate, on 16.6% volume growth, steep price increases and market-share gains. EBITDA rose 9% to Rs 73.3 crore, but the margin narrowed to 12.2% as brass costs and project discounts bit. Management expects price hikes and leaner discounts to lift second-half margins. The brokerage trimmed its target multiple to 28 times from 30 times.
Showroom report · Building materials · Q2FY27 result review
Cera Sanitaryware: Volumes Flood In, Margins Wait for the Pricing Tap to Open
BUY · Maintained
Multiple cut to 28x
Revenue beat ~13%
BOB Capital Markets keeps faith in the bathware maker's distribution-led share gains, but says the margin recovery now hinges on discounts normalising and brass and gas costs cooling.
Rating
BUY
CMP (Nov. 5)
Rs 4,802
Target (Sep. 2027)
Rs 6,437
Upside
~34%
52-week range
Rs 6,740 / 4,398
Basis
28x Sep'28E EPS
The Quarter on the Spec Sheet
Cera Sanitaryware delivered a top line that comfortably outran expectations. Consolidated revenue climbed 23.6% YoY to Rs 603 crore, some 12.8% above the brokerage's forecast, while EBITDA of Rs 73.3 crore beat its estimate by nearly 48%. The catch lies further down the sheet: gross margin slid to 44.0% from 50.7%, and adjusted profit slipped 0.9% to Rs 56.1 crore, even as it ran 46% ahead of the house view. Sequentially, though, EBITDA margin improved 202 basis points, a sign the trough may be behind the company.
| Rs crore | Q2FY27 | Q2FY26 | YoY | Q1FY27 | QoQ | BOBCAPS est. | Variance |
|---|---|---|---|---|---|---|---|
| Revenue | 603.0 | 487.9 | 23.6% | 486.0 | 24.1% | 534.6 | 12.8% |
| Raw material | 337.9 | 240.3 | 40.6% | 263.2 | 28.4% | 283.3 | 19.3% |
| Gross profit | 265.0 | 247.6 | 7.0% | 222.8 | 19.0% | 251.3 | 5.5% |
| Employee cost | 72.2 | 65.2 | 10.7% | 78.4 | -7.9% | 79.2 | -8.8% |
| Other expenses | 119.5 | 115.2 | 3.8% | 95.2 | 25.6% | 122.5 | -2.4% |
| EBITDA | 73.3 | 67.1 | 9.1% | 49.2 | 48.9% | 49.6 | 47.7% |
| Gross margin | 44.0% | 50.7% | -679 bps | 45.8% | -189 bps | 47.0% | -305 bps |
| EBITDA margin | 12.2% | 13.8% | -161 bps | 10.1% | +202 bps | 9.3% | +288 bps |
| Adjusted PAT | 56.1 | 56.6 | -0.9% | 45.3 | 23.9% | 38.4 | 46.2% |
Source: Company, BOBCAPS Research. Consolidated figures converted into crore.
Where the Revenue Flowed
Growth was broad-based. Faucetware was the standout, with revenue up 38% to Rs 268.9 crore on roughly 24% volume growth, lifting its share of the mix to 44.6% from 39.9%. Sanitaryware, still the largest line, rose 24% to Rs 284.9 crore. Tiles added 9% and the small wellness business jumped 71%.
Pipe run · Q2FY27 segment revenue, Rs crore (length to scale)
Management's own arithmetic puts growth at 27.4%, built from 16.6% volume, 9.1% price and 1.7% favourable mix. It attributes the volumes to recovering retail demand, two years of distribution work and share gains over the past three to four quarters, not to dealers stocking up ahead of price hikes. Uttar Pradesh, Bihar, Jharkhand, Odisha, Chhattisgarh and Madhya Pradesh led, offsetting softer traditional markets. Disruption among Morbi manufacturers and a shift towards branded products helped, though management calls these secondary.
Company total · 27.4%
Mix 1.7 (grey cap)
Sanitaryware · 24%
Mix 2.7 (grey cap)
Faucetware · 38%
Mix 1.9 (grey cap)
Basin fill: growth components in percentage points, 5 px per point. Source: management commentary via BOBCAPS.
Hot Costs, Cold Comfort: The Pricing Race
The gross-margin squeeze has a clear culprit. Brass, which makes up 60-65% of faucet production cost, averaged Rs 932 per kg, up 58% from a year earlier and 11% from the June quarter. Gas cost Rs 47.29 per standard cubic metre against Rs 33.79 a year ago. Cera's GAIL supply is cheaper than market gas, and fuel is only 11-12% of its in-house sanitaryware cost, but for outsourcing partners it is 30-35%, and they pass it on. Those vendors raised prices about 12% in two rounds.
Hot tap vs cold tap · cost inflation (red) against Cera's price increases (celadon), %
Faucetware
Sanitaryware
Scale 0-60%. Gas change computed by TopNews from Rs 47.29 vs Rs 33.79 per scm.
Faucet prices rose 16% in May and a further 8% from Sept. 1; sanitaryware went up 12% in May. No further increases are planned for the December quarter. Management does not expect to roll prices back if inputs soften, but warned that discounts could rise if demand weakens.
The Margin Bridge, Level by Level
Management walked investors from the June quarter's depressed 10.1% margin to September's 12.2%. Reversal of one-offs, better-than-planned pricing and operating leverage would have taken the margin to 16.8%, but brass, discounts, publicity and sourcing drained 4.6 percentage points.
Cistern levels · EBITDA margin bridge, Q1FY27 to Q2FY27 (%)
Drawn from management's bridge as reported by BOBCAPS; 12.2 px per percentage point.
The 1.7-point discount drag is the lever to watch. Management expects it to ease through the second half as old-price project orders are completed, new projects carry revised pricing, retail schemes are withdrawn and the September faucet hike works through. It remains confident of beating its 18-20% FY27 revenue growth target and holding to its EBITDA-margin guidance.
Channels, Tiers and Capacity
Tile strip · Q2FY27 revenue by channel
Tile strip · revenue by price tier
Channel mix: Projects contributed 43% in the June quarter because Cera pulled deliveries forward ahead of cost increases; management expects a 40:60 project-to-retail split from here. Most old-price project orders will be completed this quarter.
Brands: The Cera brand provides 98-99% of revenue; Senator and Cera Luxe remain small.
Capacity: Sanitaryware utilisation stands at 82%. Faucet capacity rose to 5 lakh pieces a month from 4 lakh in September and can be lifted in phases to 6-7 lakh, with a review in the March quarter. A decision on a greenfield sanitaryware plant, for which land is already bought, is due by the end of that quarter. About half the business is outsourced, including 59% of sanitaryware.
Balance sheet: Net working capital improved to 58 days from 77, and cash stood at Rs 897 crore. First-half capex was Rs 27 crore against a full-year plan of about Rs 43 crore. The company is weighing acquisitions but has nothing specific to announce.
The Brokerage's Forecasts
BOB Capital Markets raised near-term estimates on stronger volumes and pricing, but cut its FY29 EBITDA margin assumption by 109 basis points to 15.3% on input-cost inflation. It forecasts EBITDA compounding at about 18% a year over FY26-FY29.
| Rs crore | FY25A | FY26A | FY27E | FY28E | FY29E |
|---|---|---|---|---|---|
| Revenue | 1,915.3 | 2,050.1 | 2,348.6 | 2,632.4 | 2,924.3 |
| EBITDA | 290.7 | 269.2 | 286.6 | 376.2 | 446.9 |
| EBITDA margin | 15.2% | 13.1% | 12.2% | 14.3% | 15.3% |
| Adjusted PAT | 247.7 | 210.1 | 229.6 | 291.0 | 341.9 |
| Adjusted EPS (Rs) | 192.0 | 162.9 | 178.0 | 225.6 | 265.1 |
| EPS revision vs earlier | - | - | +3.3% | +2.5% | -1.4% |
| Adjusted ROAE | 18.3% | 14.9% | 15.0% | 17.4% | 18.6% |
| P/E at Rs 4,802 (x) | 25.0 | 29.5 | 27.0 | 21.3 | 18.1 |
Source: BOBCAPS Research; figures converted into crore.
Valuation and Target for Investors
The brokerage rolled its valuation forward to September 2028 earnings and lowered its target multiple to 28 times from 30 times, arriving at a September 2027 target of Rs 6,437. At Rs 4,802, the stock trades at about 27 times FY27 and 21.3 times FY28 estimated earnings.
For investors: The target implies roughly 34% upside. The shares sit about 29% below their 52-week high of Rs 6,740 and roughly 9% above the 52-week low of Rs 4,398, with the brokerage arguing that share gains justify the BUY.
What must go right: The thesis rests on discounts normalising in projects and retail, price increases flowing through and brass and gas costs moderating. Promoters hold 54%, foreign portfolio investors 16% and domestic institutions 14%.
Caution: Slippery Spots
Printed risk 1
Real-estate slowdown
A sharp slowdown in housing and construction activity would hit both project orders and retail replacement demand.
Printed risk 2
Share loss
Losing market share in sanitaryware or faucets, as Morbi rivals recover or competitors discount, would undo the volume story.
TopNews observation
Inventory build
The brokerage models inventory days rising to 83 from 70, cutting FY27 operating cash flow to about Rs 62.5 crore from Rs 341.5 crore, despite the improved 58-day working-capital figure.
Editor's Note
Revenue growth: The report's text cites 27% (27.4% in call notes) YoY growth, but its quarterly table shows 23.6% (Rs 603 crore vs Rs 487.9 crore). The gap appears to stem from the negative "Others" line; segment revenue before that adjustment grew about 27%. This article uses the reported 23.6%.
Margin declines: Page one puts the EBITDA-margin fall at 203 basis points and the gross-margin fall at 528 basis points; the table and charts show 161 and 679 basis points. This article uses the tabulated figures.
Guidance vs forecasts: Margin guidance appears as 13.5-14.0% in the summary and 13-14% in the body. The brokerage's own FY27 forecasts, 14.6% revenue growth and a 12.2% margin, sit below management's 18-20%-plus growth target and its margin band. Given first-half growth of 21.7%, they imply second-half growth of only about 9%.
Target arithmetic: 28 times the printed September 2028 EPS of Rs 230 gives Rs 6,437. However, blending the brokerage's FY28 and FY29 EPS (Rs 225.6 and Rs 265.1) gives about Rs 245, which would imply a higher figure. The report does not explain the basis for Rs 230.
Cash: The FY26 balance sheet shows cash of Rs 849.3 crore, while the cash-flow statement closes FY26 at Rs 1,208.3 crore. The difference likely reflects bank balances or liquid investments classified differently.
Sources
BOB Capital Markets (BOBCAPS), Cera Sanitaryware Result Review, Nov. 5, 2026; Cera Sanitaryware company data; NSE; Bloomberg. Figures converted into crore; charts drawn from the brokerage's printed figures. Market capitalisation estimated by TopNews from the share count implied by reported EPS.
Disclaimer: This TopNews Stock Report is based on a brokerage research report and is for information only. It is not investment advice. Investments in securities markets are subject to market risks; read all related documents carefully and consult a registered financial adviser before investing.
