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Cera Sanitaryware Ltd

| Q2 & H1 FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤12th Nov 25

Summary : Cera Sanitaryware reported flat Q2 FY26 revenue, with project sales offsetting subdued retail demand, while new brands and cost efficiencies are expected to drive H2 growth.

Management Perspective positive : We continue to be optimistic about the H2 performance. We remain cautiously optimistic about improving demand trends and confident in our ability to respond with speed and scale.

Concall Report Analysis & Insights

Business Overview

  1. Q2 FY26 revenue from operations was INR 488 crore, largely flat year-on-year.
  2. Sanitaryware segment grew 1.4% year-on-year, while Faucetware declined 3.5% due to a high base.
  3. Project sales contributed 39% of topline, showing healthy traction from real estate.
  4. Dealer Management System (DMS) rolled out to over 200 dealers, improving data visibility.
  5. New product launches contributed 33% to overall sales, reflecting focus on innovation.

Future Growth Prospects

  1. Anticipate 10-12% growth in H2 FY26, leading to 7-8% full-year growth.
  2. Expect Faucetware revenue to grow 8-10% for the full financial year.
  3. New brands, Senator and Polipluz, projected to contribute INR 40-45 crore in H2 FY26.
  4. Macroeconomic factors like stable interest rates and government spending are expected to aid recovery.
  5. Investments in brand architecture, channel segmentation, and new market development will drive sustained growth.

Management Insights

  1. We are strengthening our strategic foundation through brand segmentation and channel strategies.
  2. The Dealer Management System enhances market readiness and execution agility.
  3. Senator and Polipluz brands are making encouraging progress with network expansion.
  4. We remain cautiously optimistic about improving demand trends in H2 FY26.
  5. Divested stakes in two LLPs to streamline portfolio and focus on core categories.

Signs of Skepticism

  1. Management's H2 growth optimism (10-12%) seems high given H1's 2% growth.
  2. Maintaining 14.5-15% operating margins in H2 might be challenging with rising input costs.
  3. Retail demand recovery is still an anticipation, not yet a confirmed trend.
  4. New brands' sales contribution is currently negligible, with significant sales expected only in H2.
  5. The impact of cost optimization on margins is generic, without specific quantum details.

Risk Factors

  1. Retail demand environment remains subdued, particularly in H1 FY26.
  2. EBITDA margin slightly declined due to increased input costs, primarily brass.
  3. Working capital days increased from 72 to 77 days year-on-year.
  4. Competition is high in the sanitaryware category with new entrants.
  5. Discretionary consumer spending has slowed down.

Good To Know

  1. Completed divestment from Race Polymer Arts LLP and Packcart Packaging LLP, recording INR 5.54 crore profit.
  2. Cash and cash equivalents stood at INR 736 crore as of September 30, 2025.
  3. Capex outlay for FY26 is around INR 23 crore, mainly for maintenance and brand presence.
  4. Gas costs decreased slightly, remaining below industry average due to balanced sourcing.
  5. Employee cost inflation for staff is 10.5-11%, for workers 5%, with full year expected at 7-8%.

Key Drivers

  1. New brands expand market reach.
  2. Macroeconomic factors improve demand.
  3. Project sales provide stable growth.
  4. Cost optimization boosts profitability.

Key Analyst Discussions

Competitive Environment

  1. Questions about competition in sanitaryware from new entrants affecting growth.
  2. Inquiries on how Cera plans to compete in the premium segment with established players.
  3. Discussion on Cera's service differentiation and wide dealer network as competitive advantages.
  4. Queries on the marketing strategy and spend for new premium brands like Senator.
  5. Management acknowledged new players in the bathware zone.

Market Trends & Consumer Behavior

  1. Analysts asked about specific product segments or regions showing higher demand.
  2. Questions on whether green shoots in demand were observed in October/November.
  3. Inquiries about macroeconomic factors absent in H1 that will drive H2 recovery.
  4. Discussion on the correlation between housing sales and industry growth.
  5. Management noted a slowdown in discretionary consumer spending.

Financial Highlights

  1. Analysts questioned the feasibility of 7-8% full-year growth given H1's 2% growth.
  2. Queries on maintaining 14.5-15% operating margins despite H1 compression.
  3. Clarification sought on the INR 5.5 crore exceptional income's impact on PBT.
  4. Questions about specific areas and quantum of cost optimization efforts.
  5. Inquiries regarding employee cost inflation for the full financial year.

Product Composition

  1. Questions on segment-wise growth rates for Sanitaryware, Faucetware, Tiles, and Wellness.
  2. Inquiries about the volume and price mix within Faucetware growth.
  3. Clarification on new product launches in core categories for H1 FY26.
  4. Discussion on the contribution and margin profile of new brands Senator and Polipluz.
  5. Management stated new product launches were mainly in Polipluz and Senator.

Strategic Considerations

  1. Questions on the future revenue potential and margin scale-up for Senator and Polipluz.
  2. Inquiries about marketing spend for new brands, especially in the first year.
  3. Discussion on the role of project business contribution to overall growth.
  4. Questions about expanding distribution reach for new brands.
  5. Management detailed efforts to set up teams and distribution for new brands.