Cera sanitaryware conducted the concall today at 10:30 AM
"Massive demand has been seen in this sector after 8 years"
Here are the key highlights of the call😀
🧵👇
"Massive demand has been seen in this sector after 8 years"
Here are the key highlights of the call😀
🧵👇
Opening remarks
- Reduced interest of loan has led to increase in demand for new homes.
- Elasticity of demand has been observed in real estate.
- Faucet wear growth has been in positive trajectory.
- Reduced interest of loan has led to increase in demand for new homes.
- Elasticity of demand has been observed in real estate.
- Faucet wear growth has been in positive trajectory.
- Overall demand was robust across all the verticals.
- Projects sites were opened in Q2 were
- Lower interest cost and lower stamp duty is one of the main reason for increase in real estate demand
- Projects sites were opened in Q2 were
- Lower interest cost and lower stamp duty is one of the main reason for increase in real estate demand
- Company could not take full advantage of increase in demand due to shortcoming in manufacturing and supply chain.
- Company is using a mix of manufacturing and outsourcing to cater to the dynamic demand.
- Company is using a mix of manufacturing and outsourcing to cater to the dynamic demand.
- Restoring the overall normalcy in production impacted the company.
- Focus towards automation, there has been several enhancement in manufacturing.
- Normal percent of outsourcing of sanitary ware is 50% which went to 75% this quarter
- Focus towards automation, there has been several enhancement in manufacturing.
- Normal percent of outsourcing of sanitary ware is 50% which went to 75% this quarter
- Partial disruption in manufacturing has led to lost sales of Rs. 65 crores
- 45% of the top line was sanitary ware & 25% from faucet wares
- YoY basis sanitary ware declined by 5%
- Company had a disruption in sanitary ware vertical in Mehsana plant.
- 45% of the top line was sanitary ware & 25% from faucet wares
- YoY basis sanitary ware declined by 5%
- Company had a disruption in sanitary ware vertical in Mehsana plant.
- There is a continued growth in faucet ware vertical
- Receivables days 53.93 days
- 46.25 days payable days
- 61.56 days net working capital days
- Little more capital would be deployed in raw material and inventory
- Receivables days 53.93 days
- 46.25 days payable days
- 61.56 days net working capital days
- Little more capital would be deployed in raw material and inventory
- De-bottle necking at dealer location has led to reduction in working capital
- Sector fundamentals look strong and the demand looks healthy. Company is confident for future growth
- Sector fundamentals look strong and the demand looks healthy. Company is confident for future growth
- Demand was in excess of supply. For next 2 months it is expected to remain this way. Company is working on 3 shifts.
- Demand has proven to be very elastic and demand has been very strong.
- Demand has proven to be very elastic and demand has been very strong.
Current scenario and future growth projection
- Demand was much more than the supply. For next 2-3 quarters the demand is expected to be way more ahead than the actual supply
- Sudden surge in demand from construction and individual
- Demand was much more than the supply. For next 2-3 quarters the demand is expected to be way more ahead than the actual supply
- Sudden surge in demand from construction and individual
- Inventory level at dealer level and company level is going to be closer to 0.
- The main reason is because of lower interest rate (below 7%)
- Demand will not be a problem for the company, the main focus is to feed the demand
- The main reason is because of lower interest rate (below 7%)
- Demand will not be a problem for the company, the main focus is to feed the demand
- Dependence on imports for the company is only 5% of topline
- The industry doesn't have the idle capacity for the demand
- Lot of the vendors in morbi area is facing a labor shortage
- It takes 13-14 weeks for vendors to make the molds and start the production
- The industry doesn't have the idle capacity for the demand
- Lot of the vendors in morbi area is facing a labor shortage
- It takes 13-14 weeks for vendors to make the molds and start the production
- There has been a demand from large players
- Unorganized market is less than 30% in sanitary ware
- Unorganized is not a threat
- If markets expand then in sanitary ware top 4 players will benefit.
- Unorganized market is less than 30% in sanitary ware
- Unorganized is not a threat
- If markets expand then in sanitary ware top 4 players will benefit.
- The unorganized players will not benefit much. It would be a competition among the top players.
- Company's supply line was restored to 100% in the month of Jan
- Company's supply line was restored to 100% in the month of Jan
- The company lost sales of 65 crores of complex products which could not be produced via outsourcing
Dividend
- 15% to 18% of PAT is given out as dividend
Capex
- Rs. 21.82 crores are planned but only Rs. 5 crores approx are expended till now
- Capex is going to be lower.
Dividend
- 15% to 18% of PAT is given out as dividend
Capex
- Rs. 21.82 crores are planned but only Rs. 5 crores approx are expended till now
- Capex is going to be lower.
Liquidity
- Liquidity has been increasing since last 2-3 months.
- If working capital expands then such addition to cash would not be seen
Price hike
- Sanitary ware price hike was first in August 2020 & then in February 2020
- Faucet ware price hike was 8% to 10% in Feb.
- Liquidity has been increasing since last 2-3 months.
- If working capital expands then such addition to cash would not be seen
Price hike
- Sanitary ware price hike was first in August 2020 & then in February 2020
- Faucet ware price hike was 8% to 10% in Feb.
- Company is seeing this kind of demand after 2012.
- Focus is on Non reliance on Chinese import.
- After 8 years the company is witnessing such shortfall of supply due to high demand.
- Because of such trend Q4 results would be good.
- Focus is on Non reliance on Chinese import.
- After 8 years the company is witnessing such shortfall of supply due to high demand.
- Because of such trend Q4 results would be good.
Q3 break up
- Premium segment was 59% of sales
Margins
- Sanitary and faucet ware have the highest margin profiles.
- If the trend of cash and carry continues then working capital would be reduced.
- Premium segment was 59% of sales
Margins
- Sanitary and faucet ware have the highest margin profiles.
- If the trend of cash and carry continues then working capital would be reduced.
- Ad spend is about 4% of top time. It changes quarter to quarter. As there is shorter of products, advertisement may not be required.
- 20% costs are fixed and 80% is variable therefore increase in demand would lead to increase in margins
- 20% costs are fixed and 80% is variable therefore increase in demand would lead to increase in margins
Tiles volume
- There has been a relative decline in volumes as compared to competitors
- There has been a shift in demand towards high-end side of the product
- Domestic demand is still 2.5x of exports
- Cera tiles business is less than Rs.300 crores
- There has been a relative decline in volumes as compared to competitors
- There has been a shift in demand towards high-end side of the product
- Domestic demand is still 2.5x of exports
- Cera tiles business is less than Rs.300 crores
- Company has been in tiles only for last 4-5 years. This makes the brand less valuable compared to competitors
- Switch from coal to gas in morbi was thought to be a painful process but due to higher capacity Utilization such process became painless
- Switch from coal to gas in morbi was thought to be a painful process but due to higher capacity Utilization such process became painless
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