Release Date: May 14, 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) achieved a revenue of INR547 crores in Q4 FY24, reflecting a growth of 2.6% compared to Q4 FY23.
- The company experienced a notable increase in EBITDA and EBITDA margins, with EBITDA rising by 11.2% and margins improving to 19.3% in Q4 FY24.
- Cera Sanitaryware Ltd (BOM:532443) has successfully expanded its dealer network, growing from 5,400 to 6,200 dealers, and increased its retailer base from 14,500 to 19,300.
- The company has introduced a luxury brand and rejuvenated the Senator brand, aiming to capture a larger share of the luxury segment, which is expected to grow rapidly.
- Cera Sanitaryware Ltd (BOM:532443) has maintained a strong cash position with cash and cash equivalents standing at INR828 crores as of March 31, 2024, showcasing an increase of 20.5% compared to the previous year.
Negative Points
- The company anticipates sluggish demand conditions to continue in Q1 FY25, exacerbated by general elections and extreme heat wave conditions.
- Sanitaryware revenue registered a decrease of 2% in Q4 FY24, indicating challenges in this segment.
- Gross margins declined by 3% in Q4 FY24 due to higher discounts offered to address challenging market conditions.
- Tiles revenue decreased by 10% in Q4 FY24, reflecting a decline in this segment.
- Despite the increase in dealer and retailer touchpoints, the overall growth rate excluding tiles was only 4% for the full year FY24, indicating muted demand.
Q & A Highlights
Q: My first question was if you could just repeat what you said of the fiscal year March 27 now we're looking at a revenue target of INR2,900 crores. Did I hear that right?
A: Yes. (Vikas Kothari, CFO)
Q: The other question was I missed that number. So you gave the split of FY24 segment wise how you valued they did right. So wellness grew 10% times, 10% of what we have, what was the breakup of the other two?
A: The breakup was as far as the sanitary is concerned, there was a decline of 2%. Faucetware, there is a growth of 10% and a net 21% growth and in case of tiles decreased by around 10%. (Vikas Kothari, CFO)
Q: This muted ness in sanitaryware. I'm talking about the full year now, I am not talking about the fourth quarter. I am saying largely the full year, this muted ness in sanitaryware and also in tiles, what are some of the reasons that you could ascribe this to?
A: As far as the financial year 2024 is concerned, it is impacted by subdued demand across all the regions. In terms of the sanitaryware, since we are established in this segment for a larger period than faucetware, and the market size with respect to faucetware is quite big as compared to sanitaryware. So, some impact with respect to this slowness has contributed, and we are hopeful that financial year 2025, after these elections are over, we will be again resuming back in terms of the positivity in demand. (Vikas Kothari, CFO)
Q: The first question is related to the similar to this. In the last call you said that the average price increase in the connection with the second half of 2% and effective from the February 24. So is that taken? And after that, the 2% of degrowth in the sanitaryware you had observed in Q4?
A: Yes. So as far as this sanitaryware is in terms of the price rise if you see, means we have not taken any price rise in the past 20 months. The recent price rise, which was taken in February 2024 was 2% in sanitaryware segment to offset the impact of increased input cost. (Vikas Kothari, CFO)
Q: In terms of your dealer and distributors. What is the any changes you've made at your distributor reach. And so does the dealer, which I mean, I just want to understand that. And within that, how much is overlapping between sanitaryware and faucetware?
A: Regarding the distribution networking equity means, we are having a base of around 6,200 dealers. And this network, if you see in terms of the growth versus the previous years. So previous year, we were having around 5,400 dealers were there. So there is a growth of around 800 dealers and of the employee base of the retailers also because our generally our distribution network is largely through dealers, and we have introduced this loyalty program for the retailers. So from there, we are counting the numbers also this is the voice uploaded into the system. So our retailers made has also improved, which was around 14,500 in March 23, and it is now increased to 19,300. (Vikas Kothari, CFO)
Q: So you said the distribution, if you look at the dealer or the retailer touch points have increased meaningfully and yet our growth is weak. How do we explain this is a market share loss in certain pockets and gain in certain pockets, which is offsetting How do we explain this? Despite such a significant increase in distribution touch points and the sales didn't see much increase. I'm saying from the full year perspective, the growth rate, excluding tiles is just 4% .
A: The dealer distribution network increase that is a continuous process as a company. We are always in the process of enrolling new dealers so that we can reach out to newer areas and areas which were not covered earlier, but the demand sluggishness, which has been there in the industry and if the macroeconomic factors are such that they are not supporting and there is a certain amount of demand which is prevailing in the market and the good deeds outlook that we are doing, that kind of leads that we are able to create right now, you're not able to see reserves because the demand was slow. But as we go forward and the demand improves with the kind of increased lease, you'll find that the benefits that we have of these the reach that we have created right now will be coming in once the improvement in demand happens. (Deepak Chaudhary, GM Finance & Audit)
Q: If you could help us understand, I know it's hard to quantify, but just a ballpark in terms of what is the market size of sanitary and phosphate for the full year FY24? And what kind of a decline or increase you would have seen for the full year at the industry level, just a ballpark number would also help.
A: So like you rightly told it is difficult in terms and as such, there is no establishment in terms of the figures, but our understanding, which is on a very global business so sanity here, you see the market size between organized and unorganized is around INR9000 crores to INR10,000 crores and quarter here being a larger market between organized and unorganized. It is around INR14,000 crores. (Vikas Kothari, CFO)
Q: On gross margin, if you could elaborate, I mean, even despite the price hike we had to do some volume push, so the margins have definitely come down. So could you directionally give us what was the change in ASP or something that has come up because the margins are drastically down.
A: The elaborate explanation I have given during the opening remarks, which I have read. But again, since you raised this question, I just want to clarify, you say historically, our gross margins remains between 52%, 53%, 54%. This time, the gross margin as compared to the previous a quarter four of FY23, we saw a decline of 3%. So this decline is largely like I explained, on account of the higher discounts being offered and this is mainly the prevailing market conditions to address the prevailing market conditions. So that was there. But however, this decline is largely offset by the other savings for the other initiatives, what we have taken so that it is reflecting overall in terms of the EBITDA. Additionally, a growth of 1.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
