Did You Miss Out On A Stock Backed By Dolly Khanna, Vijay Kedia, Nalanda Capital & Jwalamukhi?

Today, I have a sense of déjà vu because when I wrote about Cera Sanitaryware in April 2014, the stock was in a similar super-heated mode, with each day taking it to new heights.

“Is Cera Sanitaryware Still A Good Stock To Buy?” I asked with my usual naivety and a tinge of nervousness in my tone. I had good reason to be nervous because the stock was already a 4-Bagger over three years.

Luckily, I mustered the courage to answer the question in the affirmative, though as a safety measure I advocated use of the SIP method.

What made the answer possible is the fact that all four super-savvy investors held massive chunks of Cera. It was also evident that the wizards held the stock as a “high conviction” pick.

This position continues today as well. Cera is the top-holding of Dolly Khanna and Vijay Kedia. As of 31st December 2014, Dolly holds 1,28,590 shares worth Rs. 36 crore at the CMP of Rs. 2800. Vijay Kedia is ahead of Dolly and holds 3,00,000 shares worth Rs. 84 crore. Nalanda India Equity Fund, founded by whiz-kid Pulak Prasad, holds stock worth Rs. 104 crore while Jwalamukhi/ Westbridge, founded by four whiz-kids, Sumir Chadha, K.P. Balaraj, S.K. Jain and Sandeep Singhal, holds a treasure trove of stock worth Rs. 261 crore.

The best part is two other super-savvy investors have decided to join the party. The first is SteadView Capital Mauritius Ltd which now holds 2,21,122 shares. The other is the India 2020 Fund (promoted by Lighthouse Funds) which has acquired 3.51 lakh shares. SteadView Capital boasts of several other multi-baggers in its portfolio such as Astral, Jubilant Foods, KPIT, Page Industries, PVR and VGuard. Lighthouse Funds is also a seasoned investor with unlisted top-notch stocks like Bikaji Foods and Unibic in its portfolio.

The attention by all of these super-savvy investors has understandably sent Cera Sanitaryware into orbit and a consistently upward trajectory. Today, the stock surged 13% giving a 270% YOY gain. The three month return is itself a fabulous 67%.

At this stage, we will have to ask the same question that was asked several months ago: “Is Cera Sanitaryware Still A Good Stock To Buy?”

The answer will have to be the same. However, if you look at the P/E (54x), you will be frightened. The only way to muster courage to buy the stock is to look at the market cap which is still “only” Rs. 3500 crore. This coupled with the strong brand, competent management, low debt, aggressive expansion plans, and high return ratios will give you some confidence.

Also, according to Bharat Modi, Strategic Advisor to Cera, the Company is running at 100% capacity because the demand for sanitary ware has increased exponentially. This is a result of the “Swachch Bharat” mission as also the rapid urbanization. He also pointed out that Cera is increasing its sanitary ware capcacity from 27 lakh units to 33 lakh units and the faucet capacity from 2,500 units per day to 8,000 units per day with a view to meet the growing demand.

So, it does look like the SIP method will continue to be the preferred manner to tuck into Cera.