Cera, multibagger stock for long term investors

The Indian sanitaryware and bathroom fittings industry is proliferating and is expected to continue the momentum for the next five years. Cera Sanitaryware Ltd is growing in line with the market demand for sanitaryware in India. It offers various products such as washbasins, water closets, bathtubs, faucets, cisterns, seat covers, sinks, bidets, other accessories, etc.

The growth in the housing sector, both in the urban and the rural areas, is the critical demand driver for sanitaryware. The government's 'Housing for All' initiative, push on infrastructure development, Smart Cities Mission, urbanisation and other construction initiatives accelerate the growth of the sanitaryware industry. Indian consumers are now more conscious of health and hygiene, with the Covid-19 pandemic creating 'the most extensive seismic shift. Indian consumers have opened their wallets and are willing to pay for premium products. Hence, their growing preference for feature-rich bathrooms with elegant, sleek, and minimalistic sanitaryware. Architects and designer builders are turning bathrooms into luxurious sanctuaries for relaxation. The phenomenon is leading to rising sanitaryware demand.

Apart from the market dynamics, one needs to closely monitor what the Cera Sanitaryware does and whether it further builds on the gains that it has already made in the last 12-18 months. The company has a solid balance sheet with Rs 397 crore sales in June 2022, up 74 per cent from Rs 228 crore in June 2021. Quarterly net profit was Rs 39 crore in June 2022, up 223 per cent from Rs 12.21 crore in June 2021. EBITDA stood at Rs 62 crore in June 2022, up 127 per cent from Rs 27.38 crore in June 2021. The company's net debt stood at Rs 45 crore. The sanitaryware segment is expected to witness a revenue CAGR of 15 per cent over FY22-24E. The greenfield sanitaryware facility is scheduled to commission output in 24-30 months at a capex of Rs 1.28 bn. Cera Sanitaryware company has spent less than 1 per cent of its operating revenues on interest expenses and 13.4 per cent on employee costs in the year ending 31 March 2022.

Cera, with its unstained and ultra-clean legacy since 1980, has a dominant presence in the sanitaryware segment and business interest in allied businesses like faucet ware, tiles and wellness products, showers, faucets, PVC cisterns and seat covers, etc. Cera's share price is likely to give higher returns and is extremely well positioned for 2022. The company was listed in July 1998 after its IPO on July 17, 1998. Cera's share price reached Rs 4,733 apiece now. If an investor had invested Rs 1 lakh in Cera stock 20 years ago, the investment would have become Rs 3.17 crore today. If an investor had invested Rs 1 lakh in Cera stock 15 years ago, the investment would have become Rs 70.23 lakh today. One lakh investment in this stock in 2012 would have turned to Rs 15.91 lakh today. The catch is that the company announced a 1:1 bonus on 16/07/2010 (the record date being 03/09/2010). The actual cost would be Rs 5 per share, and the actual return would be 94300 per cent for 20 years for those investors who bought Cera before 2002.

If you invested Rs 1 lakh in Cera one year ago, then your investment would have become Rs 1.01 lakh today, whereas Rs 1 lakh investment in Sensex would have delivered Rs 1.07 lakh. Cera's scrip did not give expected returns in the last year due to its consolidation phase. However, Cera Sanitaryware shares proved to be one of the best multibagger stocks that delivered stellar returns to patient investors. Many analysts and broking houses have maintained the 'Buy' recommendation with a March 23 target price of Rs 5,600 as Cera's management has guided to double the revenue over the three years. Cera Sanitaryware is expected to book a revenue CAGR of 17 per cent during FY22-24E. Cera Sanitaryware gave a three-year return of 88 per cent as compared to Nifty Midcap 100, which gave a return of 91 percent.