Whalesbook
Prabhudas Lilladher has maintained a 'BUY' rating on Cera Sanitaryware, setting a target price of Rs 7,178. The company reported modest Q2FY26 results with flat revenue and a slight EBITDA margin contraction due to increased input costs, although its B2B segment showed improved momentum. Cera Sanitaryware forecasts 7-8% revenue growth and 14.5-15% EBITDA margin by FY26. New brands, Senator and Polipluz, are expected to contribute significantly from H2FY26. The company will report financials on a standalone basis from Q2FY26.
Prabhudas Lilladher's research report reiterates a 'BUY' rating for Cera Sanitaryware, setting a target price of Rs 7,178. The company's performance in Q2FY26 was described as modest, with flat revenue growth and approximately 40 basis points contraction in EBITDA margin, attributed to increased input costs and a challenging weak demand scenario. However, the B2B segment demonstrated improved momentum, partially offsetting the slower demand observed in the retail space.
Cera Sanitaryware has provided guidance for the fiscal year 2026, expecting 7-8% growth in revenue and an EBITDA margin between 14.5-15%. A significant development is the upcoming contribution from new brands, Senator and Polipluz, which are anticipated to start adding to revenue from the second half of FY26 onwards. The company expects Rs 400-450 million from these brands in H2FY26 and a substantial Rs 1.5 billion over the next two years.
Furthermore, Cera Sanitaryware has divested its stakes in its subsidiaries. Consequently, from Q2FY26, the company will report its financial statements on a standalone basis, simplifying its financial structure.
Outlook:
Prabhudas Lilladher estimates a Compound Annual Growth Rate (CAGR) of 10.9% for revenue, 12.2% for EBITDA, and 10.2% for Profit After Tax (PAT) over the FY25-28E period. While downward revising FY27/FY28E earnings estimates by 3.2%/2.6%, the brokerage maintained its target price of Rs 7,178, based on a valuation of 30 times September 2027 estimated earnings.
Impact:
This news is significant for investors as it confirms analyst confidence in Cera Sanitaryware's future growth prospects, supported by strategic initiatives like new brand launches and B2B segment expansion. The guidance provides clarity on short-to-medium term financial targets. The shift to standalone reporting may offer greater transparency. While Q2 results faced headwinds, the report suggests a positive trajectory with a maintained 'BUY' rating and target price.
Rating: 7/10
Difficult terms:
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operating performance, showing profitability from core operations.
CAGR: Compound Annual Growth Rate. It represents the average annual growth rate of an investment over a specified period longer than one year, assuming that profits are reinvested.
FY26/FY27E/FY28E: Fiscal Year 2026, 2027, and 2028. The 'E' indicates that these are estimated figures.
Standalone basis: Financial statements that report the financial performance and position of a single entity, without consolidating the results of its subsidiaries or other affiliated companies.
Input cost: The expenses incurred by a company to produce goods or services, such as raw materials, labor, and manufacturing overhead.
B2B segment: Business-to-Business. This refers to transactions and business activities that occur between two companies, rather than between a company and individual consumers.
Basis points (bps): A unit of measure used in finance to describe the percentage change in a financial instrument. One basis point is equal to 0.01% (1/100th of a percent).
