Cera Sanitaryware Ltd is optimistic about sustaining its growth outperformance despite near-term headwinds in retail demand. The company is banking on project sales and luxury branding as key levers to drive expansion.
Notably, management has signalled it will reassess its ambitious revenue target of ₹2,900 crore by FY27 in Q1FY26. Originally, the company had projected 8% growth in sanitaryware and 12-13% in faucets. However, with demand stagnant for nearly a year, these estimates may need to be revised, analysts at Yes Securities noted after a recent visit to Cera’s plant in Kadi, Gujarat. While the management expects a pickup in Q2FY26, the strength of the recovery remains uncertain.
Read this | Marico’s resilience faces a test as costs rise
Amid demand headwinds, Cera has paused its greenfield sanitaryware expansion, citing weak market conditions and high gas costs. However, with ₹27 crore already spent on land acquisition, the company could restart work on the project within 18 months if demand improves. Meanwhile, its brownfield faucet expansion remains on track, with capacity expected to hit 600,000 pieces per month after phase 2.
To counter sluggish retail sales, Cera has increased its focus on project sales, which now contribute 35% of total revenue—up 500 basis points year-on-year. While this shift provides volume stability, it comes at a cost: project sales yield lower margins than retail. Cera’s Ebitda margin for 9MFY25 stood at 14.2%, down from 15.7% in 9MFY24.
To offset margin pressure, Cera is pushing for premiumization, expanding its Senator and Luxe brands in metros and tier-1 cities, with a goal of 10% revenue contribution by FY27. However, competition in this space is already intense, raising questions about whether Cera can truly differentiate itself and command pricing power.
Cera’s management expects margin to bounce back to the 16-17% range as demand recovers, citing temporary pressure from discounts due to market sluggishness, which they believe has bottomed out.
Read this | Voltas preps to beat the heat with robust Q4 volumes. What about margin?
“We believe demand challenges in the bathware segment will continue in the near term,” Prabhudas Lilladher’s analysts said in a report. The broking firm estimates revenue and Ebitda CAGR of 14% and 18.7%, respectively, over FY25-FY27.
Also read | Emami is grooming for a better future, but can growth catch up?
With retail demand soft and a revenue target reassessment looming, investors will look to management for clearer signals on the recovery path. For now, Cera’s stock has nearly halved from its 52-week high of ₹10,789.95 in August.
