ConCall Summary – May 2024
FINANCIAL PERFORMANCE
- Revenue increased by INR 547 crore during the quarter, reflecting a growth of 2.6% compared to the same period in the previous year
- EBITDA and EBITDA margins notably increased in Q4 FY 2024
- Gross margin declined due to higher discount offers but offset by cost optimization efforts
- Cash and cash equivalents as of March 31, 2024, increased by 20.5% compared to the previous year
MARKET CONDITIONS AND STRATEGY
- Management anticipates sluggish demand conditions to continue in Q1 FY 2025
- Sales target recalibrated to March 2027 due to market conditions
- Focus on premium and luxury segments expecting growth in luxury segment
- Introduction of new products with innovative designs for luxury customers
- Launching dedicated brand stores for premium offerings
- Commitment to traditional segments while advancing in premium market stance
- Increase in new design and product launches, accounting for 30-35% of total sales
OPERATIONAL UPDATES
- Company maintained and slightly improved its sales compared to the previous year despite challenging market conditions
- Strong track record of retaining top talent at Cera
- Introduction of an ESOP scheme to motivate and reward key human resources
- Multiple initiatives underway including capacity expansion, product development, advertising, and marketing
OUTLOOK AND GROWTH INITIATIVES
- Optimistic that demand situation will improve post Q1 FY 2025
- Real estate upswing expected to positively impact projects and demand
- No price rise in sanitary ware for the past 20 months, recent 2% increase in February 2024 to offset input costs
- Cost-saving program and margin improvement efforts expected to continue in FY 2025
SALES AND DISTRIBUTION
- Dealers common for sanitary ware and faucet ware
- Continuous process of enrolling new dealers to reach new areas
- Slow demand affecting sales despite increased distribution touchpoints
- Market size estimates for sanitary ware and faucet ware
- No significant loss of market share expected despite sluggish market conditions
PRODUCT SEGMENTS
- Premium mix percentages for different product segments
- Explanation on decline in gross margins and offsetting initiatives
COMPETITION
- Competition from new players entering the industry
- New competitors sourcing from outsourcing partners, limited dealer network
- Management plans to rejuvenate the Senator brand and focus on the luxury segment
FINANCIAL GUIDANCE
- Target for luxury brands to contribute 8% to 10% of total turnover by 2,900
- Premium for luxury brands compared to Cera premium brands expected to be 60% to 70%
- Price hikes dependent on market conditions and competitor reactions
- Focus on cost optimization to protect margins in the current market scenario
- Margins expected to improve as demand situations improve
- Cash reserves around INR 828 crores as of March 2024, with approved dividends of INR 60 per share
- Revenue CAGR guidance of 16% based on volume increase of 10% to 13%, mix benefit of 4% to 6%, and price impact of 2% to 3%
FUTURE PLANS
- Routine capex for the next financial year around INR 25.4 crores
- Greenfield expansion for sanitary ware estimated at INR 150 crores
- Capacity utilization and expansion plans
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