Cera Sanitaryware Shares May Have Hit 52-Week High — But Why This Analyst Is Advising Caution

Analysts at ICICI Securities said that Cera Sanitaryware‘s recent ‘steep’ surge in valuation is a sign to remain cautious.

The Cera Sanitaryware Analyst: Arun Baid-led analyst team at ICICI Securities downgraded their rating for the stock from ‘buy’ to ‘add’ but maintained the price target of ₹6,746.

The Cera Sanitaryware Thesis: The brokerage firm in its latest note, said that it expects demand trends
for the company’s core products (faucetware, sanitaryware) to remain healthy in Q4FY23.

The firm noted that with new product launches combined with increased A&P activity by hiring celebrities
like Kiara Advani and Vijay Deverakonda, have enabled the company “to get higher consumer
mindshare, especially in tier-2 and below markets.”

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The brokerage firm also expects the company to maintain a stable operating margin of 16-16.5 % going forward as raw material prices subdue. It also highlighted that despite higher spending on A&P and increased competition from new entrants, the margins will likely remain unaffected as the company will have the cushion of operating leverage and a better product mix.

However, analysts warned that demand slowing down in the housing market, and higher input costs, can dent the company’s profitability.

Price Action: Cera Sanitaryware shares were trading 5.25% lower at ₹6,107.70 in the mid-market hours of trading on Friday. The stock hit a new 52-week high of ₹6,788 on Feb. 22.

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