Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cera Sanitaryware Ltd (BOM:532443, Financial) reported revenues of INR398 crores and profit after tax of INR47 crores for Q1 FY '25.
- New product development accounted for 32% of total sales in the last quarter, indicating a focus on innovation.
- The company has successfully expanded its faucetware facility, increasing monthly production capacity from 3 lakh to 4 lakh pieces.
- Cera Sanitaryware Ltd (BOM:532443) has a strong cash position with cash and cash equivalents standing at INR864 crores as of June 30, 2024.
- The company has initiated a buyback of its fully paid equity shares at INR12,000 per share, amounting to INR130 crores, reflecting confidence in its financial health.
Negative Points
- Revenue from operations declined by 6.8% YoY, from INR427 crores in Q1 FY '24 to INR398 crores in Q1 FY '25.
- EBITDA margins decreased by 150 basis points, from 19% in Q1 FY '24 to 17.5% in Q1 FY '25, due to lower fixed cost absorption and higher discounts.
- Profit after tax decreased by 16.1% YoY, from INR56 crores in Q1 FY '24 to INR47 crores in Q1 FY '25.
- The company experienced subdued demand across key markets, driven by intense heat-wave conditions and the effects of general elections.
- Inventory days increased from 74 days to 75 days, indicating potential inefficiencies in inventory management.
Q & A Highlights
Q: Sir, related to the bifurcation which you have given among the tier-1, tier-2, tier-3 as well as for entry and the premium level, so if I look at your tier-1 sales has actually increased on a YoY basis, and tier-3 and tier-2 has been down. So you had seen in the tier-2, tier-3 is the more competitiveness or demand slowdown in the period as compared of tier-1?
A: Yeah, Praveen, thank you for asking the question. So my understanding is, as far as the tier bifurcations are concerned and if you compare with the previous comparisons also, so more or less, there is a demand slowness in all the tiers. However, if you see in terms of the breakup, for the tier-1, it was 35% versus the previous corresponding quarter, 33%. Tier-2, it was 22% and the previous corresponding quarter, it was 22%. And in tier-3, the percentage is 43% against the previous quarter corresponding 45%. So as such, if you see in terms of the impact of the slowness of demand is concerned, it has impacted all regions, all cities or tiers and including the market segments.
Q: Okay. Second question is related to the gas. How is the gas pricing as an average, or if you can give the GAIL and the Sabarmati numbers as well?
A: Yes. Regarding the gas cost, so as we had seen in the previous year also, the gas has largely benefited in terms of the overall price. So gas prices remain favorable during this quarter also. The average gas price from GAIL was INR28.38 per cubic meter as against INR29.31 in Q1 FY '24. Similarly, the average gas price from SGL was INR51.40 per cubic meter as against INR50.01 per cubic meter in (technical difficulty) increase drawl of gas from GAIL reaching out to roughly 86% in Q1 FY '25, which was 78%. The overall weighted average gas cost in Q1 was at INR31.64 as against INR33.91 in Q1 FY '24, which is significantly lower as compared to the industry standards.
Q: And the last question, sir, related to the margin profile. So for this quarter, we had seen a correction in the margin. And can you give some guidance for the rest of the year? Because your guidance of EBITDA margin of 16%-plus and 29 billion, by '27, as you had said you are sticking to that? So next nine months, where you are seeing this margin profile to be?
A: Yeah. Thank you, Praveen. So as far as margins are concerned, as I have already briefed that the margins were impacted because of the activity impact. But this, we see it as a very short term. Our understanding is that we are quite confident in terms of the margins, which we will keep impact between 16% to 17%. And I would say, it will further improve as the demand situation will improve. So it is just the one quarter where we have seen or where largely all the major industry players, including Cera, has seen the slowness on account of different factors. So that has somewhat impacted the margins. But for the rest of the year, we are quite confident that the margins will be maintained between 16% to 17%.
Q: First is, in the initial stage, you said that right now, we are -- so the quarter one FY '25 was not able to -- it was a not good quarter for the company, but we are maintaining our targets for the coming future. So do we have any set number that we have given, that this target have been met in 2, 3 years down the line for top line or bottom line sort of way?
A: Thank you. Thank you. So regarding the guidance, what we have given earlier, the guidance given earlier was of reaching the target of INR2,900 by March '27, which will remain intact. This target actually we have set after factoring for the expected slow performance in Q1 and Q2 of the current financial year. And we anticipate that the improvement in the demand condition will start from the second half of the year. So as far as the guidance which we have given of maintaining a 16% CAGR over a period of 3 years is intact.
Q: Sir, firstly, when you specify that you are expecting demand to improve from H2, so I mean, is that a hope or it is backed by some orders or some inquiries that you're already getting? And if so, then from which segment?
A: See, there are 2 segments in which we operate. One will be the B2C and other will be the B2B. B2B segment has already started seeing improvements. If you look at our project bank side vis-a-vis December and if I look at compared December with June, December '23 with June '24. You'll find that there will be an increase of something like 15% to 20% on our project bank side, which is indicating that the project business has started picking up. Retail has been being going slow for compound Q3, and Q1 was kind of anticipated also because of the fact that general elections was there. So project is kind of already picked up, and we are anticipating that the project will be going on to the retail side as well. So Q3, we are anticipating from the floor that we have already received on the project bank, so that should be reflective on the retail side also.
Q: And sir, in terms of the product mix change, the premium segment that constituted around 44%, what was the number in March Q1? And is there any target for this year or coming, say, by the time you want to achieve INR2,900 crore top line. How much should premium be as a product portfolio?
A: So just giving you the numbers in terms of the categories between premium with an entry. So premium, it is 44% in Q1 FY '25. And in Q1 FY '24, it was 45%. Mid it was 32%, in the previous quarter, it was 31%. And entry, it is 24% in Q1 FY '25 as against [22%] in Q1 FY '24. So more or less it is in terms of the categorization between entry, mid and premium, more or less, there is no major change. However, in terms of the efforts what we are putting in terms of the new category, what is -- what we are under the three brands that have been out that is the Luxe, Senator and Lustre series, which is going to showcase our luxury segment. So that is at a
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
