A Quality Play in Building Materials Space

Share price (%) 1 mth 3 mth 12 mth

Absolute performance 18.8 19.8 4.6

Relative to Nifty 8.2 12.5 1.7

Shareholding Pattern (%) Mar-20 Jun-20

Promoter 54.48 54.48

Public 45.52 45.52

1 Year Stock Price Performance

Note: * CMP as on 23 October 2020

A Quality Play in Building Materials Space

Financial Summary Y/E Mar (Rs.mn)

FY19 FY20 FY21E FY22E FY23E

Revenue 13,515 12,237 10,847 13,056 14,133EBITDA 1,983 1,655 1,173 1,922 2,192 PAT 1,151 1,133 640 1,230 1,423 P/E (x) 30.4 31.6 56.3 28.6 24.6 P/B (x) 5.0 4.5 4.2 3.8 3.3

Source: Company, RSec Research

1. Cera Sanitaryware (CERA) is one of the leading building material companies in India having pan-India presence. It enjoys over ~12% market share in sanitaryware business with strong positioning in faucetware and tiles business.

2. It continues to focus on offering innovative products to create a niche position particularly in premium segment. The company has expanded its annual sanitaryware capacity from 2mn to 2.7mn pieces in FY11 to over 3.6mn pieces as of FY20-end.

3. CERA is positioned amongst Top-3 organized players in sanitaryware market owing to its presence across product segments at various price points and unique designs. A proper balance of in-house manufacturing and outsourcing sets it apart from its peers, who depend on Chinese imports.

4. Most Indian consumers are actively willing of disown Chinese brands and ask for ‘Made in India’ certification. The shift in consumer preference is now likely to aid domestic players like CERA.

5. A prudent diversification into faucetware and tiles segment over last 9 years enables the company to become a major one-stop housing solutions provider, paving the way for long-term sustainable earnings growth.

ESG Analysis: While analyzing 20 key criteria under ESG Matrix, we have assigned an overall score of 61% to CERA. Under “Environmental Head”, we have assigned 58% score, as it has stabilized power cost by generation of electricity through non-conventional (wind and solar) sources for captive use. Additionally, several measures under ‘Waste Minimization and Waste Utilization’ have aided CERA to maintain an effective control over wastages. Under “Social Head”, we have assigned 60% score, as the company scores high on customer satisfaction, despite scoring low on gender diversity. Under “Governance Head”, the company scores fairly well (65%) across criteria (please refer to page no 5. for detailed ESG analysis).

Outlook & ValuationWith dominant presence in sanitaryware segment and business interest in allied businesses like faucetware, tiles and wellness products, CERA is likely to see healthy traction in ensuing years. Additionally, balanced products portfolio at a varied price points, robust distribution network and rising brand awareness in Tier-II and Tier-III cities bode well for sustained earnings growth. Further, lean balance sheet (D/E at 0.1x) and consistent cash generation (cumulative FCF in last five years is Rs2.2bn) offer comfort. Whilst 8% earnings CAGR over FY20-23E does not look to be impressive on account of pandemic led slowdown, asset turnover at 1.8x in FY23E vs. average of 2.5x in last five years suggests that CERA can sustain growth momentum at current asset base or low capex. Valuing the stock at 30x P/E on FY23E EPS of Rs109, we initiate coverage on CERA with BUY and a 2-Year Target Price of Rs3,271.

Click Image for Video Presentation

Cera Sanitaryware CMP* (Rs) 2686

Upside/ (Downside) (%) 22

Bloomberg Ticker CERA IN

Market Cap. (Rs bn) 35

Free Float (%) 46

Shares O/S (mn) 13

Ceramic | India

Institutional Equity Research

Initiating Coverage | 26 October 2020

BUY

Key Triggers Imminent recovery in individual house building and thrust on low-cost housing projects Strong foothold in sanitaryware and faucets segments Strategic and balanced mix of in-house manufacturing and outsourcing Cost saving initiatives, strong brand positioning and better after sale services Strong balance sheet with consistent cash generation

2-Year Target Price: Rs.3,271

We have made changes to our Recommendation and Target Price. Please refer to Page no. 26 at the end of the report.

Research Analyst

Binod ModiContact: 022 4303 4626/9870009382Email: [email protected]

Research Associate:

Girija Shankar RayContact : (022) 4303 4000/91670411117

Email : [email protected]

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https://youtu.be/vLF2JM7W3Q8

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Our Thesis

Key Sectoral Theme

f Sanitaryware: Sanitaryware industry is skewed towards organized players with the Top-3 players i.e. CERA, HSIL and Parryware, who have been commanding >90% market share in the organized sanitaryware industry. Apart from product premiumization and strong branding and marketing, what differentiates the organized players from the unorganized ones, is their ability to deliver globally competitive products.

f Faucetware: The industry size is estimated at ~Rs90bn, which has been growing at a healthy rate of 8-10% over the last decade. About 53% of the industry is organized and has prominent players like Cera, HSIL, Parryware and Jaquar, etc. Unlike tiles and sanitaryware, replacement cycle for faucet is faster and drives the industry growth. In terms of demand, retail demand has the major share of 70%, which supports the growth of organized players.

f Tiles: The domestic tiles industry registered robust double-digit growth (12-14%) over the last decade. Notably, RERA implementation and demonetization had adverse impact on demand from the real estate sector over last couple of years. However, the industry is witnessing early signs of revival mainly led by increasing traction in affordable housing under flagship “Housing for All” programme.

f Volume Growth to Pick-up with Imminent Demand Recovery: Initial sign of demand revival in Tier-II/Tier-III cities and rural areas (led by favourable monsoon and sound rural economy) and imminent traction in affordable housing projects are likely to remain as the key tailwinds for the industry and the sectoral players like CERA.

f Strong Foothold in Sanitaryware Market: With over 12% market share, CERA is the third largest sanitaryware player in India followed by HSIL and Parryware each accounting for over 17% market share. Focus on innovative products offerings, creating a niche position particularly in premium products segment were the key growth drivers of the company.

f A Prudent Production-mix Bodes Well: CERA has been able to strike a prudent balance between in-house manufacturing and outsourcing. Its in-house facilities are used for complex products i.e. Wall-Hung Water Closets (WCs), Table Top Basins and one piece floor-standing WCs.

f Cost Saving Initiatives to Aid Profitability: CERA has undertaken various cost saving initiatives in recent months to reduce its operating cost, which are expected to yield desired results in ensuing quarters.

Key Investment Theme

f Insignificant demand recovery from real estate and housing segment

f Sharp increase in input and gas prices

f Regulatory interferences

Key Risks

2

EPS & Target Price


Price Sensitivity AnalysisEPS (Rs) Growth (%) Fwd P/E (x) 20 25 30 32 35

FY17 (-3) 77.00 32.5 1,540 1,925 2,310 2,464 2,695

FY18 (-2) 81.60 6.0 30.6 1,632 2,040 2,448 2,611 2,856

FY19 (-1) 88.50 8.5 28.2 1,770 2,212 2,655 2,832 3,097

FY20 (Base year) 84.99 -4.0 29.4 1,700 2,125 2,550 2,720 2,975

FY21E (year 1) 47.68 -43.9 52.4 954 1,192 1,430 1,526 1,669

FY22E (Year 2) 93.83 96.8 26.6 1,877 2,346 2,815 3,003 3,284

FY23E (Year 3) 109.02 16.2 22.9 2,180 2,726 3,271 3,489 3,816


Scenario AnalysisBase Case: Our base case analysis, which is mainly based upon segmental composition, shows that increase in revenue contribution of sanitaryware segment to 52% in FY23E from 49% in FY20 should result in 8% earnings CAGR through FY20-FY23E, based on which, we arrive at a 2-Year Target Price of Rs3,271 (target PE multiple of 30x).

Base CaseFY20 FY21E FY22E FY23E

Sanitaryware Revenue Contribution (%) 49% 50% 51% 52%Faucetware Revenue Contribution (%) 25% 25% 25% 24%

Tiles Revenue Contribution (%) 22% 21% 21% 20%

EBITDA (Rs mn) 1,655 1,173 1,922 2,192 EBITDA Margin (%) 13.5 10.8 14.7 15.5PAT (Rs mn) 1,133 640 1,230 1,423 EPS (Rs) 85 48 94 109 Target Multiple (x) 30 Target Price (Rs) 3,271


2,310 2,448 2,655 2,550

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Target Price (Rs) EPS (Rs)

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Bull Case: Our bull case analysis shows increase in revenue contribution of sanitaryware segment to 54% in FY23E from 49% in FY20 should result in 10% earnings CAGR through FY20-FY23E, based on which, we arrive at a 2-Year Target Price of Rs3,727 (target PE multiple of 33x).

Bear Case: Our bear case analysis shows increase in revenue contribution of sanitaryware segment to 50% in FY23E from 49% in FY20 should result in 5% earnings CAGR through FY20-FY23E, based on which, we arrive at a 2-Year Target Price of Rs2,462 (target PE multiple of 25x).

Bull CaseFY20 FY21E FY22E FY23E





Bear CaseFY20 FY21E FY22E FY23E





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Key Criteria Score Risk Comments

Management Quality 8 Low The management has displayed remarkable quality over the years in terms of gaining market share and ensuring quality growth

Promoter's Holding Pledge 10 Low Zero pledged shares, despite the promoters’ group has varied interest in other businesses as well

Board of Directors Profile 8 LowA perfect blend of experience, expertise and professionalism with sound track record offers comfort; out of total 9 board members, 5 members are independent directors

Industry Growth 6 Low Industry has been witnessing mid single-digit growth since last decade, which is expected to be maintained in coming fiscals as well

Regulatory Environment / Risk 5 Medium Regulatory risk in terms of increase in duties was quite visible historically

Entry Barriers / Competition 5 MediumOligopoly nature of the industry (as 3 large players account for >90% market share in organised space) acts as a hindrance for any new player to enter into the business while competition from unorganised players is high

New Business/Client Potential 6 Low Strong brand equity with better after sales services

Business Diversification 8 Low It has presence across geographies in India and has fairly diversified into tiles segment as well

Market Share Potential 8 Low Necessary resources are in place to maintain market share

Margin Expansion Potential 8 Low Working on various measures to contain opex further

Earning Growth 7 Low Earnings clocked 14% CAGR in last 7 years; expected to clock 8% CAGR in next 3 years

Balance Sheet Strength 7 Low Steady working capital cycle and operating cash flow over the years kept balance sheet lean

Debt Profile 7 Low Debt to EBITDA ratio at 0.54x and D/E at 0.12x in FY20 offer comfort

FCF Generation/NWC 7 Low It generated cumulative FCF of Rs2bn in last 7 years and is expected to generate cumulative FCF of Rs2.75bn in next 3 years due to low capex and strong OCF

Dividend Policy 7 Low Average dividend payout ratio stood at 11% in last 7 years

Total Score Out of 150 107

Average Score (%) 71% Low

Investment Decision Matrix (IDM)

5

Key Criteria Score Risk Comments

Environmental

Climate Change and Carbon Emission 5 MediumThe company is committed to achieve all the norms relating to emission, pollution and environmental laws; it did not get any show-cause/legal notices from any regulator in FY20; it has also installed rooftop solar power system (which is one of the largest in this region), which will reduce carbon footprint to a great extent

Air & Water Pollution 4 HighIt has reduced water dependence by recycling water used for manufacturing process; it has developed a fully functional rain water-harvesting system; it has also developed 4-litres flushing system with same effectiveness as 6-litres flushing system. However, in our view, pollution risk still persists in this industry

Biodiversity 5 Medium The company claims to have undertaken several initiatives to conserve biodiversity; it has undertaken >10,000 plantation

Deforestation 5 MediumThough the ceramic companies are not much exposed to deforestation; the company complies with environment and forest department norms for setting up any new plant

Energy Efficiency 7 LowThe company has stabilized power cost by generating electricity through non-conventional sources (wind and solar) for captive use; as of FY20, its total installed non-conventional energy capacity stood at 10.325MW, which produced 18.1mn unit

Waste Management 7 LowUnder the initiative of ‘Waste Minimization and Waste Utilization’, numerous measures have been started including recycling of solid and liquid and ZLD (zero liquid discharge), high energy efficient rated machines, compliance to pollution norms, awareness generation among employees etc; majority of waste generated in the company’s operations is recycled and balance is disposed off safely; it has also Effluent Treatment Plant

Defence / Arms / Ammunition Exposure 8 Low No exposure to arms and ammunition space

Social

Customer Satisfaction 7 Low

Most of the customer complaints are appropriately addressed and resolved and there was negligible percentage of unresolved complaints as of FY20-end; consumer satisfaction surveys are conducted periodically to assess the consumer satisfaction levels and consumer’s trends; its after sales team of technicians, a 24-hour toll free call centre, and timely on-site service from the technicians has been one of its key strengths; there are no cases relating to unfair trade practices, irresponsible advertising and/or anti-competitive behaviour during last five years

Data Protection & Privacy 7 Low The company has in place appropriate data protection tools

Gender & Diversity 4 High Out of 2,544 total employees, only 86 are women, while there are 16 employees with disability

Employee Engagement 6 Low A safety and skill up-gradation training is provided on regular interval to permanent casual/temporary/contractual employees

Community Relations / Service 6 LowThe company has spent Rs33mn towards CSR activities in FY20 mainly in the areas of education, healthcare, rural development, woman empowerment and eradicating hunger etc.

Human Rights 6 LowThe company is committed to respect and protect human rights; its code of conduct and the human resource practices cover most of these aspects; no complaints relating to human rights violation was received in FY20

Labour Standard 6 Low The company does not hire child labour and there is no instance of forced/involuntary labour as well

Environmental Social Governance Matrix (ESGM)

6

GovernanceAudit Committee Structure 6 Low

The audit committee consists of 6 directors i.e. Mr. JK Taparia, independent director (Chairman), Mr. Vikram Somany, Mr. Sajan Kumar Pasari (independent director), Mr. Lalit Kumar Bohania (independent director), Mr. Surendra Singh Baid (independent director) and Ms. Akriti Jain (independent director)

Bribery & Corruption 7 Low Its policy relating to ethics, bribery and corruption serves as the guiding philosophy for its employees as well as the employees of subsidiary

Executive Compensation 6 Low Average salary of key executives witnessed 5% CAGR over last five years compared to 6% CAGR in pre-tax profit during the same period

Lobbying 6 Low

The company has represented through various associations from time to time for various economic and corporate governance issues in the interest of the industry in general and ceramic industry in particular; it is a member of Indian Council of Sanitaryware Manufacturers, IndianGreen Building Council (promoted by CII), Kadi Industrial Association and Gujarat Chamber of Commerce & Industries; the company is a preferred partner of Confederation of Real Estate Developers Associations of India (CREDAI)

Political Contribution 6 Low The company did not make any political contribution/donation in FY20

Whistleblower Scheme 8 LowThe company has a whistleblower policy in place, which provides a platform to all employees, vendors and customers to report any suspected fraud or error or confirmed incident of fraud/misconduct; the board has also adopted vigil mechanism policy

Total Score Out of 200 122

Total Score (%) 61% Low

Score For < 5 Red High Risk For 5 Blue Medium Risk For > 5 Green Low Risk

Total Score (%) For < 50 Red High Risk For 50 Blue Medium Risk For > 50 Green Low Risk

7

Channel Check Takeaways f Demand Scenario: Demand momentum has improved significantly after lockdown

especially in Tier-II and Tier-III cities mainly due to increase in demand for low-ticket housing. Further, lower housing loan rate is also helping the demand for affordable housing and in turn aiding the demand for sanitaryware and faucetware products. While sharp demand recovery is attributable to filling-up of channel inventory, demand from new and replacement segment is also expected to remain healthy in coming period.

f Pricing: CERA hiked the retail prices of sanitaryware and faucetware products by ~5-15% in Aug’20, which may lead to sharp improvement in operating performance in subsequent quarters. This may result in a sharp improvement in operating performance of companies in subsequent quarters.

f Demand for Touch-free Faucetware: Led by consciousness about COVID-19, there has been a sharp increase in demand for premium touch-free faucetware products. However, cheap imported products including Chinese faucetware are dominating the market as of now.

f Credit Period: Credit period continued to remain tight for dealers. The companies are not willing to give credit period beyond 20-30 days.

f Disbursal of Bank Loans: The banks in many cases are still reluctant to disburse loans especially in LAP (Loan against Property) even after sanctioning. LAP is an important tool for the banks funding for many real estate companies and dealers, which has been hit due to banks’ reluctance to disburse loan in apprehension of contraction in the value of properties. This is impacting building material businesses post lockdown.

Update on COVID-19 Impact f COVID-led nationwide lockdown impacted the building material businesses across

segments. CERA has lost revenue to the tune of Rs2.5bn due to lockdown in current fiscal so far, as its plants remained closed for more than 45 days. However, the company has been able to increase its capacity utilization level to 90-100% of the pre-COVID level during Aug-Sept’20 with the ease in lockdown restrictions on phased manner.

f Disruption in production activity in several nations like Spain and Italy etc. and emergence of anti-China sentiment across the globe due to spread of novel Coronavirus from Wuhan have unleashed better export opportunities for India’s tiles and sanitaryware manufacturers.

f Healthy export opportunity helped the unorganized players to ramp-up their production and improve capacity utilization, which has also eased out pricing pressure from the domestic markets. Notably, the sanitaryware companies successfully hiked the prices in Aug’20.

f Led by cautiousness in light of the rising cases of COVID-19, there has been a sharp increase in demand for premium touch-free faucetware products. CERA has introduced plug-n-play type of smart installation of sanitaryware products for the consumers, who choose to adopt ‘do it yourself’ installation procedures.

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f Production & Sales Ramp-up: Cera significantly ramped up production and sales in 2QFY21 following consistent month-on-month improvement since May’20. Its revenue run rate, which reached to 99% of pre-COVID level in Aug’20, is likely to witness growth from 2HFY21 onwards. Notably, it has lost revenue to the tune of Rs2.5bn in the current fiscal due to nationwide lockdown following COVID-19 outbreak.

f Product-mix: In revenue terms, sanitaryware segment is expected to witness recovery relatively faster compared to faucetware and tile segments owing to likely traction from affordable housing segment and improvement in replacement demand. It expects the revenue share of sanitaryware segment to increase from 49% in FY20 to 51-54% in next 2 years, while the revenue share of faucetware segment is expected to remain in the range of 24-27% from the level of 25% in FY20. Further, revenue share of tile segment is likely to come down from 22% in FY20 to 19-21% over next two years.

f Focus on GVT Tiles: CERA operates tiles business though associate company (Milo Tiles) and JV (Anjani Tiles) and mainly used to focus on GVT due to better pricing and increasing demand. While Milo Tiles produced 100% GVT in FY20, Anjani Tiles also shifted 100% production lines to GVT as against 75-80% in FY20. It operates tiles business as cash and carry model.

f Price Hike: The company has hiked the prices of sanitaryware products in the range of 3-5% the prices of in Aug’20, which is likely to aid its margin from 2QFY21 onwards.

f Segmental Margin: CERA generates operating margin in the range of 19-25%, 15-20% and 25-30% in sanitaryware, faucetware and wellness products segments, respectively.

f Premium Faucetware Products: CERA has witnessed exponential growth in premium touch-free sensor-based faucet products in the wake of COVID-19 pandemic. CERA is selling >1,200 premium products/month with price ranging between Rs10,000-25,000/piece as against total sale of 1,200 pieces in FY20. Notably, a typical faucet at the low end starts at Rs2,500-3,000/piece.

f Cost Reduction: CERA has undertaken various steps in recent months to reduce its operating cost. It has already saved ~Rs100mn by way to renegotiating rentals and other expenses in the current fiscal. Further, it has used 80% of total gas (relatively cheaper) sourced from GAIL in 1QFY21, as against average 50:50 consumption between GAIL and Sabarmati Gas. Weighted average gas price stood at Rs12.5/SM in 1QFY21 as against Rs21/SM in 1QFY20.

Management Concall Takeaways

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Financials Financials (Rs mn) FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20

Revenue 10,085 11,853 13,515 12,237 20,716 22,495 16,048 18,591

EBITDA 1,756 1,774 1,983 1,655 2,938 2,756 2,127 2,914

APAT 1,017 1,032 1,151 1,133 1,050 793 121 470

Growth (%)

Revenue 10.0 17.5 14.0 -9.5 5.7 8.6 -28.7 15.8

EBITDA 24.3 1.0 11.8 -16.5 -12.9 -6.2 -22.8 37.0

APAT 21.9 1.4 11.6 -1.6 -10.0 -24.4 -84.7 287.3

Margins

EBITDA margin (%) 17.4 15.0 14.7 13.5 14.2 12.2 13.3 15.7

Net Margin (%) 10.1 8.7 8.5 9.3 5.1 3.5 0.8 2.5

Per Share (Rs)

EPS 77.0 81.6 88.5 85.0 3.94 2.86 0.58 6.70

DPS 9.0 12.0 12.0 13.0 4.0 4.0 3.0 3.0

Book Value 401 466 539 593 56 57 48 174

Valuations (x)

P/E 34.9 32.9 30.4 31.6 19.0 26.2 129.3 11.2

EV/EBITDA 19.7 19.5 17.2 20.5 11.3 13.4 8.5 5.6

P/B 6.7 5.8 5.0 4.5 1.35 1.32 1.56 0.43

Return Ratio (%)

RoCE 19.5 16.6 16.9 12.0 8.2 6.2 3.1 6.7

RoE 20.9 18.8 17.6 15.0 7.3 5.1 0.9 3.9

D/E (x) 0.20 0.16 0.13 0.12 0.54 0.73 0.77 0.74

Source: Company; RSec Research

Comparative Analysis

CERA HSILBusiness Presence

Sanitaryware Capacity (mn pieces) 3.6 4.2

Market Size (Rs bn) 48 48

Market Share in SW (%)- FY20 12.4 17.1

Faucetware Capacity (mn pieces) 1.8 4.2

Market Size (Rs bn) 90 90

Market Share in FW (%)- FY20 3.4 4.2

Tiles (MSM) 5.9

Retail Touchpoints (nos) 11,306 14,000

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Key Charts

Exhibit 1: Revenue & Growth


Exhibit 2: Segmental Revenue Break-up


Exhibit 3: EBITDA & EBITDA Margin


Exhibit 4: APAT & Growth


f Revenue growth (7% CAGR over FY16-20) was impacted by slowdown in real estate sector as well as recent COVID-19 pandemic. We expect a healthy comeback in FY22E.

f Strong focus on sanitaryware segment is expected to drive higher contribution in coming fiscals.

f Higher contribution of sanitaryware segment and cost saving measures are likely to aid margin.

f Strong operationg performance along with lean balacesheet is likley to aid profit growth.

56%53%

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Investment RationaleOur investment thesis is based on the following premises:I. Volume Growth to Pick-up with Imminent Demand Recovery in 2HFY21II. Strong Foothold in Sanitaryware MarketIII. Healthy Competitive Positioning on Prudent Production-mix IV. Cost Saving Initiatives to Aid ProfitabilityV. Strong Brand Positioning, Higher Customer Touch Points & Better After-Sale ServiceVI. Lean Balance Sheet & Strong Cash Generation

I. Volume Growth to Pick-up with Imminent Demand Recovery in 2HFY21Demand prospects for building materials like sanitaryware, faucetware and tiles are steadily reviving with steady decline in the impact of COVID-led disruptions. Initial signs of demand revival are seen in Tier-II and Tier-III cities and rural areas led by favourable monsoon and healthy recovery in rural economy and imminent traction in affordable housing projects, which are likely to remain as the key tailwinds for the industry in general and the key sectoral players like CERA in particular..

Having seen 30% capacity utilization in May’20, the company has been witnessing consistent month-on-month demand improvement in subsequent months. Its average utilization reached 80% of normal level in July’20 and over 95% in Aug’20, which clearly indicates that the demand environment is steadily reviving.

We note that there is ample of opportunity for building materials from affordable housing segment under PMAY. As per PMAY (Rural + Urban), ~12mn houses are to be constructed by FY22E. Notably, 26.9mn houses (urban + rural) have been sanctioned since the beginning of PMAY, while 14.9mn houses were completed till Aug 20. Further, 6.5mn of new houses are yet to be sanctioned.

In the absence of strong demand from urban real estate markets due to various reasons, affordable housing segment has been a major demand driver for last 4-5 years for the building material manufacturers. We believe government’s strong commitment to complete the targeted number of houses augurs well for building materials segment i.e. sanitaryware, faucets and tiles.

Exhibit 5: Affordable Housing Segment – At a Glance

Particulars (mn) PMAY-Rural PMAY-Urban Total

Total Target 22.14 11.22 33.36

Sanctioned 16.2 10.66 26.86

Completed 11.3 3.6 14.9

Balance Opportunity 10.84 7.62 18.46

Balance Opportunity from Sanctioned 4.9 7.06 11.96

Source: Government Document; Rsec Research

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II. Strong Foothold in Sanitaryware MarketCERA forayed into sanitaryware business in 1980. Over the decades, the company has made considerable progress on core business front mainly led by consistent focus on building a strong brand that caters to all segments at various price points. With over ~12% market share, the company is the third largest sanitaryware player in India followed by HSIL (Hindware) and Parryware each accounting for 17% market share. Focus on offering innovative products to create a niche position particularly in premium products segment is the key growth drivers for the company. CERA has expanded its annual sanitaryware capacity from 2mn to over 3.6mn pieces in FY20.

We note that sanitaryware manufacturing is a complex process, which requires the state-of-the-art- technology, adequate training to the labourers and even standardization of process. Over the last seven years, CERA has done excellent job in upgrading manufacturing capabilities by introducing fully-automated pressure casting of sanitaryware products, robotic anti-bacterial glazing of sanitaryware, automated grinding, polishing, threading and electroplating for faucetware.

Some of these processes have assumed greater importance in view of COVID-19 also, as the company has witnessed a strong growth in premium products i.e. touch-free sensor-based products, hands-free products, water-saving products and nano-coated anti-microbial products that offer enhanced safety and hygiene.

Exhibit 6: A Snapshot of Industry Structure in Sanitaryware Market Share

Source: Industry; Rsec Research

Exhibit 7: Capacity Summary

Units Type Stake Location

Sanitaryware Owned 100% Kadi, Gujarat 3.6 mn pieces

FaucetsOwned 100% Kadi, Gujarat

7200 pcs per day

Tiles

Anjani Tiles Pvt Lttd JV 51% Gudur, AP 3.3 MSM

Milo Tiles Associates 26% Morbi, Gujarat 2.6 MSM

Source: Rsec Research

13

Set of Differentiated Product Offerings: In addition to unique and differentiated products, CERA offers 21 different coloured commodes vs. different players, who offer up to 5-6 colour option basically white. In addition to this, CERA is more focused on branding and it is one of the first companies to have celebrity brand ambassador. In 2006, the company introduced 6 bath studios to display the entire range of products to the architects, institutional buyers and retail customers. Later in 2008, it expanded retail presence through distributors-owned bath galleries.

Exhibit 8: A List of Products offerings under Different Brands

Brands Segment Customer Target

ISVEA SW Luxury & Premium

JEET SW Low & Middle

SENATOR SW Luxury & Premium

REFINITO Tiles- PVT ALL

IDENTITY Tiles- PVT ALL

ELEGNATE Tiles- PVT ALL

PATIO Tiles- PVT ALL

LUCIDO Tiles- GVT ALL

DIGITALE Ceramics ALL

Source: Rsec Research

14

Exhibit 9: Owned and Outsourcing % Revenue in Sanitaryware Exhibit 10: Owned and Outsourcing % Revenue in Faucetware

Source: Company, Rsec Research Source: Company, Rsec Research

The company has developed strong in-house manufacturing capabilities over last couple of years, while the least dependence on Chinese imports has offered an edge to CERA over others, who are dependent on Chinese imports especially for several complex products. Further, in the wake of recent stand-off with China over border related issues, a large number of consumers prefer ‘Made in India’ products over Chinese brands. This change in consumer behavior is a welcome move for the organized players like CERA, which is now in the process of working on an effective communicating strategy on its ‘Make in India’ and ‘Aatma Nirbhar Bharat’ strategy to ensure a healthy traction in sales in ensuing quarters.

III. Healthy Competitive Positioning on Prudent Production-mix With a large number of products offerings at different price points, it is imperative for any company to adopt a proper balance of production mix in order remain competitive in the industry. We note that CERA has been able to make a prudent balance between in-house manufacturing and outsourcing. Its in-house facilities are best used for complex products i.e. Wall-Hung Water Closets (WCs), Table Top Basins and one piece floor-standing WCs. Additionally, its own capacities are focused towards higher margin products, while it relies on domestic outsourcing strategy for lower technology products which do not require sophisticated robotics and can be produced competitively.

15

IV. Cost Saving Initiatives to Aid Profitability The company has undertaken several cost saving measures in recent months in order to further reduce operating cost, which are expected to yield results in ensuing quarters. Such measures include:

A. Consolidation of Warehouses: CERA has started merging warehouses, which are located under same locations. Similarly, it is reducing the size of warehouses, wherever is required.

B. Renegotiation of Rental & Other Discretionary Exps.: It has renegotiated rental agreements (for rented offices and display centers) and rationalized various discretionary expenditures. In recent earnings conference call, the management guided that the company’s fixed cost is likely to decline by ~Rs100mn due to renegotiations.

C. Revision in Wage Agreement: CERA has revised wage agreement by implementing additional incentives on variable basis to reduce fixed cost.

Additionally, the company has succeeded to save on labour cost and high outsourcing cost front by adopting automation in designing and manufacturing through robotic glazing and 3D printing for sanitaryware and faucetware. Further, automation and balanced outsourcing have helped CERA to limit its permanent workers and engage more contractual workers.

Exhibit 11: Operating Cost as % of Sales Exhibit 12: Input Cost (RM + Power & Fuel) as % of Sales


In addition to cost saving initiatives, the company has displayed a unique and prudent inventory management strategy by opting just in time inventory management. The localized warehousing at several geographies allows it to cater to local markets at any moment. The company encourages its project linked customers for scheduling smaller dispatches of products as and when their sites need them, rather than try to save logistic cost via large deliveries. This helps the company in ensuring faster and smaller billing cycles and results in better receivable management. Further, implementation of SAP ERP has helped the company to have a healthy credit control system, as the ERP doesn’t allow for a fresh supply to vendors with dues more than 45-60 days.

Exhibit 13: Receivable Days and Working Capital Cycle

Source : Company, Rsec Research

84.6

85.7 85.784.6

82.6

85.0 85.3

86.5

89.2

85.384.5

78.0

80.0

82.0

84.0

86.0

88.0

90.0

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E

Opex as % Revenue

53.1

54.854.5

54.8

50.050.9

51.5

52.4

55.5

52.952.3

47.0

48.0

49.0

50.0

51.0

52.0

53.0

54.0

55.0

56.0


Input cost as % reveue

62 59

72 7584

89 86

6370 70 70

121

102112

103108

122116

105112 112 112

0

20

40

60

80

100

120

140


Debtors Days WC Cycle (Days)

16

V. Strong Brand Positioning, Higher Customer Touch Points & Better After-Sale Service Over the years, CERA has created a strong brand positioning, established wider distribution network with sound after sale service. These have become core competencies of the company, which enable it to enjoy price premium. CERA has tied-up with Bollywood celebrities i.e. Sonam Kapoor and Dia Mirza to create product awareness and brand presence in a very competitive market. CERA Style Studios (total number of studios 10), which display the entire range of products with average store size of ~7,000 sq. ft are quite successful in promoting one-stop bathroom solution.

The company has also introduced dealer-owned showroom concept, which is called CERA Style Galleries (total number of galleries 139) with minimum average showroom size of ~1,000 sq. ft, which have also become successful in creating better brand positioning. Further, there are 2,700 retailers owned CERA Style Centre as on FY20 and the company plans to add 600 more such centres in next two years.

CERA has maintained sound after sales service by establishing a strong servicing team, spare parts team and 24x7 call center. Further, it also established customer touch points, where the consumers can walk-in and register complaints or after-sales service requests. It has also launched an app through which a consumer can reach the company with 24-48 hour of lead time for sorting out any kind of issues raised. We believe these are essential benefits of the product, which has a lifespan of 20 years or more and therefore the customers do not bother paying a price premium to the tune of Rs500-2,000.

Exhibit 14: Geographical Footprint through CERA Style Studioss


Exhibit 15: A Snapshot of Sales and Trade Network

FY20

Dealers 3,564

Retailers 11,306

Total 14,870

CERA Style Galaries 139

CERA Style Centre 2,700

After Sales Team 320

Source:Company,Rsec Research

17

VI. Lean Balance Sheet & Strong Cash GenerationCERA has been maintaining very lean balance sheet with its D/E ratio consistently remaining in the range of 0.1x-0.2x. A steady receivable cycles and innovative approach to maintain its working capital cycle aided its balance sheet and cash flow. CERA started acting prudently in capex plan, as it is now committed to maintain a band of 40-50% of operating cash flow as capex programme for ensuing years, which is unlikely to result in any deterioration in its balance sheet quality. Further, its average asset turnover has been more than 2.6x over last 7 years, which stands at 1.6x currently mainly due to COVID-led slowdown. However, it offers comfort that the company can grow significantly at current capacities hereon.

Exhibit 16: Debt to EBITDA offers Comfort


0.550.58

0.54

0.46

0.56

0.68

0.39

0.27

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8


Gross Debt/EBITDA (x)

Exhibit 17: Free Cash Flow Over the Years


234287

173

669

827

668

1096989

0

200

400

600

800

1000

1200


FCF (Rs mn)

18

Outlook & Valuation With dominant presence in sanitaryware segment and business interest in allied businesses like faucetware, tiles and wellness products segment, we expect CERA to see healthy traction in ensuing years. Additionally, balanced products portfolio at a varied price points, robust distribution network and rising brand awareness in Tier-II and Tier-III cities bode well for sustained earnings growth. Further, lean balance sheet (D/E ratio at 0.1x) and consistent cash generation (cumulative FCF in last five years is Rs2.2bn) offer comfort. Whilst 3% earnings CAGR over FY20-23E does not look impressive on account of COVID-led slowdown, asset turnover at 1.8x in FY23E vs. average of 2.5x in last five years suggests that CERA can sustain growth momentum at current asset base or low capex. Valuing the stock at 30x P/E on FY23E EPS of Rs109, we initiate coverage on CERA with BUY and a 2-Year Target Price of Rs3,271.

Exhibit 18: 1 year forward PE Band

Source: Company, Rsec Research

0

500

1000

1500

2000

2500

3000

3500

4000

Date

Sep-

11

Apr-

12

Oct

-12

May

-13

Dec-

13

Jul-1

4

Feb-

15

Aug-

15

Mar

-16

Oct

-16

May

-17

Dec-

17

Jun-

18

Jan-

19

Aug-

19

Mar

-20

Oct

-20

20x

25x

30x

35x

40x

19

Exhibit 19: Revenue & Growth Exhibit 20: Revenue - Segmental Contribution


56%53%

49% 50% 51% 52%

22% 24% 25% 25% 25% 24%20% 20% 22% 21% 21% 20%

2% 3% 4% 4% 4% 3%

0%

10%

20%

30%

40%

50%

60%

FY18 FY19 FY20 FY21E FY22E FY23E

Sanitaryware Faucetware Tiles Others

Exhibit 21: EBITDA & EBITDA Margin Exhibit 22: APAT & Growth


(60%)

(40%)

(20%)

0%

20%

40%

60%

80%

100%

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60


APAT (Rs bn) Growth

Exhibit 23: Return Ratios Exhibit 24: Leverage Status


19.0% 19.5%

16.6% 16.9%

12.0%

7.6%

13.5% 14.1%

21.2% 20.9%18.8%

17.6%

15.0%

7.8%

13.9% 14.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%


RoCE RoE

0.78

1.020.96

0.91 0.92

0.800.75

0.60

-0.01

-0.05 -0.06

-0.11 -0.13

-0.18

-0.25

-0.28 -0.30

-0.25

-0.20

-0.15

-0.10

-0.05

-

0.00

0.20

0.40

0.60

0.80

1.00

1.20


Gross Debt (Rs bn) D/E (x)

Financial Overview

9.2 10.111.9

13.512.2

10.813.1 14.1

10.0%

17.5%14.0%

-9.5%-11.4%

20.4%

8.2%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0


Revenue (Rs bn) Growth (%) (RHS)

1.411.76 1.77

1.981.65

1.17

1.922.19

15.4%

17.4%

15.0% 14.7%13.5%

10.8%

14.7%15.5%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

0.00

0.50

1.00

1.50

2.00

2.50


EBITDA (Rs bn) EBITDA Margin (%) (RHS)

20

Profit & Loss Statement

Y/E Mar (Rs mn) FY19 FY20 FY21E FY22E FY23E

Income 13,515 12,237 10,847 13,056 14,133

% yoy growth 14.0 (9.5) (11.4) 20.4 8.2

Total Cost 11,533 10,582 9,674 11,134 11,941

RM Consumed 6,062 5,503 5,207 5,941 6,360

% of Total Sale 44.8 45.0 48.0 45.5 45.0

Exmployee Costs 1,655 1,707 1,451 1,669 1,836

% of Total Sale 12.2 14.0 13.4 12.8 13.0

Stores, Spares, Chemicals and Packing Materials Consumed

334.3 330.9 293.4 339.5 353.3

% of Total Sale 2.5 2.7 2.7 2.6 2.5

Power and Fuel 571.0 584.3 517.9 623.4 674.8

% of Total Sale 4.2 4.8 4.8 4.8 4.8

Freight and Forwarding Expenses (Net)

760.6 690.2 611.8 718.1 763.2

% of Total Sale 5.6 5.6 5.6 5.5 5.4

Sales Promotion Expenses 801.2 567.9 503.4 605.9 655.9

% of Total Sale 5.9 4.6 4.6 4.6 4.6

Publicity & Advertisement Expenses

522.1 424.2 376.0 452.6 489.9

% of Total Sale 3.9 3.5 3.5 3.5 3.5

Total Othe Expenses 828 775 714 785 808

% of Total Sale 6.1 6.3 6.6 6.0 5.7

EBIDTA 1,983 1,655 1,173 1,922 2,192

EBIDTA Margin (%) 14.7 13.5 10.8 14.7 15.5

Depreciation & Amortization 280 388 427 465 509

EBIT 1,703 1,267 745 1,458 1,684

Finance Costs 85 101 97 92 89

Other Income 186 182 180 265 300

PBT 1,803 1,349 829 1,631 1,895

Tax 652 243 209 410 477

% Tax 36.2 18.0 25.2 25.2 25.2

Net Profit- Reported 1,151 1,105 620 1,220 1,418

YoY Growth (%) 8.5 (4.0) (43.9) 96.8 16.2

Add: Share of Profit / (Loss) from Associates

0.5 0.6 - - -

Profit for the year 1,151.5 1,106.0 620.1 1,220.4 1,417.9

Non-Controlling Interests 0.2 (26.5) (20.0) (10.0) (5.0)

Net Profit- Adjusted 1,151 1,133 640 1,230 1,423

Net Profit Margin (%) 8.5 9.3 5.9 9.4 10.1

21

Balance Sheet Statement


LIABILITIES

Share Capital 65 65 65 65 65

Reserves & Surplus 6,944 7,642 8,178 9,227 10,455

Total Shareholder's funds 7,009 7,707 8,243 9,292 10,520

Non - Controlling Interests 103 77 57 47 42

Long Term Borrowings 396 434 400 400 300

Deferred Tax Liability 436 299 299 299 299

Other Long Term Liability 227 404 362 375 426

Long Term Provisions 67 106 95 99 112

Total LT Liabilities 1,125 1,244 1,157 1,173 1,138

Current maturity of long term borrowings

64 75 50 50 50

Short Term Borrowings 447 410 350 300 250

Trade Payables 1,109 953 854 885 1,006

Other Current Liabilities 1,885 1,698 1,522 1,576 1,792

Short Term Provisions 28 26 23 24 27

Current Tax Liabilities (Net) 137 4 4 4 4

Total Current Liabilities 3,671 3,165 2,803 2,838 3,129

Total Liabilities 11,908 12,194 12,260 13,350 14,829

ASSETS

Fixed Assets

Net Block 3,853 4,209 4,282 4,417 4,608

CWIP 190 5 5 5 5

Non Current Investments 208 388 388 388 388

Other Financial Assets (Non-current)

121 311 297 302 319

Other Non-current Assets 134 75 67 69 79

Total 4,507 4,989 5,040 5,182 5,400

Current Investment 1,570 1,895 1,895 1,895 1,895

Inventories 2,158 2,430 2,178 2,255 2,565

Trade Receivables 2,984 2,228 2,214 2,292 2,607

Cash and Bank Balance 110 21 369 1,141 1,697

(v) Other Financial Assets (Current)

184 227 204 211 240

(c) Other Current Assets 395 403 361 374 425

Total Current Assets 7,401 7,205 7,220 8,168 9,429

Total Assets 11,908 12,194 12,260 13,350 14,829

22

Cash Flow Statement


PBT 1,803 1,349 829 1,631 1,895

Depreciation 280 388 427 465 509

Finance Cost 85 101 97 92 89

Interest and dividend received -20 -23 - - -

Foreign Exchange (loss) / gain -8 - - - -

Profit on Sale of Investments -102 -127 - - -

Loss / (Profit) on Sale of Property, Plant and Equipment (Net)

6 16 - - -

Others -20 46 - - -

Operating profit before WC changes 2,025 1,748 1,353 2,187 2,492

(Increase)/Decrease in Inventories (223) (272) 252 (77) (310)

(Inc.)/Dec. in Trade and other receivables (308) 727 80 (99) (395)

(Increase)/Decrease in Other assets (134) (50) 22 (7) (27)

Increase/(Dec.) in Trade and other liabilities 461 (434) (316) 97 390

Increase/(Decrease) in Provisions (10) 37 (14) 4 17

Cash generated from operations 1,811 1,756 1,377 2,106 2,166

Direct Taxes Paid (567) (464) (209) (410) (477)

Extraordinary Itmes

Net Cash from Operating activities 1,244 1,292 1,168 1,696 1,689

Purchase of Fixed Assets (575) (465) (500) (600) (700)

Sale fo Fixed Assets 25 9 - - -

Interest and dividend received 13 3 - - -

Payments for purchase of Debentures (121) (10) - - -

Payments for Invt. in Subsidiaries & Associates (81) - - - -

Payments for purchase of Mutual Funds (1,956) (1,801) - - -

Proceeds from sale of Mutual Funds 1,573 1,607 - - -

Proceeds from Fixed Deposits 15 12 - - -

Capital Subsidy on Fixed Assets 2 2 - - -

Net cash in Investing activities (1,104) (643) (500) (600) (700)

Proceeds from Capital Contribution 36 - - - -

Proceeds/ (Repayment) of Long-Term Borrowings (Net)

(44) 47 (59) - (100)

Proceeds/ (Repayment) of Short-Term Borrowings (Net)

(12) (39) (60) (50) (50)

Paym. of Preference Divi & Divi Distribution Tax (8) (3) - - -

Dividend on Equity Shares paid (156) (338) (104) (182) (195)

Tax on Dividend (32) (70) - - -

Finance Cost (74) (75) (97) (92) (89)

Net cash from financing activities (290) (477) (320) (324) (434)

Net Inc/(Dec) in cash and cash equivalent (150) 172 348 772 556

Opening Cash 236 110 21 369 1,141

Closing Cash 86 282 369 1,141 1,697

23

Key Ratios

Y/E Mar FY19 FY20 FY21E FY22E FY23E

P/E 30.4 31.6 56.3 28.6 24.6

P/CEPS 24.4 23.4 33.3 20.7 18.1

P/BV 5.0 4.5 4.2 3.8 3.3

EV/EBIDTA 17.2 20.5 28.5 17.0 14.6

EV/Sales 2.5 2.8 3.1 2.5 2.3

Dividend Payout (%) 13.6 15.3 21.0 16.0 16.5

Dividend Yield (%) 0.4 0.5 0.4 0.6 0.7

Adj. OCF Yield 3.3 3.5 3.1 4.6 4.6

Per Share Data (Rs)

EPS (Basic) 88.5 85.0 47.7 93.8 109.0

EPS (Diluted) 88.5 85.0 47.7 93.8 109.0

CEPS 110.0 114.8 80.5 129.6 148.1

DPS 12.0 13.0 10.0 15.0 18.0

Book Value 539 593 634 714 809

Returns (%)

RoCE 16.9 12.0 7.6 13.5 14.1

RoE 17.6 15.0 7.8 13.9 14.3

Turnover ratios (x)

Asset Turnover (Gross block) 2.5 2.0 1.7 1.8 1.8

Inventory (days) 62 69 69 69 69

Receivables (days) 86 63 70 70 70

Payables (days) 32 27 27 27 27

WCC (days) 116 105 112 112 112

24

Revenue Streams

Source : Company; RSec Research

Cera Sanitaryware (CERA) is one of the leading building material companies in India, established in 1980 by Mr. Vikram Somany (promoter). It enjoys over 12% market share in sanitaryware space amongst the organized players, apart from faucetware and tiles business. Its plants are strategically located in order to cater to customers across India as well as to give intense competition to other players with cost efficiency. Its sanitaryware and faucetware unit is located at Kadi (Gujarat), while its JV tiles units are located at Nellore (Andhra Pradesh) and Morbi (Gujarat). The company has a strong distribution network, which comprises of 19 own warehouses, >1,450 dealers and >12,000 retail touch-points.

Company Overview

Milestone – Growth Trajectory over the Years

Year Achievements

1979-80 Incorporated Madhusudan Industries Ltd. (MIL) consisting of oil division and ceramic division with capacity of 0.3mn pieces.

1995-96 The company established its outsourcing division with the initial turnover of Rs14mn. Manufacturing capacity increased to 1.25mn pieces.

2001-02 Demerger of MIL and transfer of Ceramic business to form Cera Sanitaryware (CERA).

2005-06 Undertook expansion of Rs140mn and started the concept of bath studios with the first studio at Ahmedabad

2006-07 Undertook expansion with Rs13mn investment and increased capacity to 1.38mn pieces.

2007-08 Installed gas based captive power plant at Kadi and wind-turbine generator and increased capacity to 2mn pieces.

2010-11 Successfully commissioned manufacturing plant for faucetware with initial daily capacity of 2,500 pieces.

2015-16 Entered into tile business by making share subscription agreement with Anjani Group to acquire controlling interest of 51% in Anjani Tiles (Andhra Pradesh) at a cost of Rs184mn.

2018-19 Acquired 26% stake in a Morbi-based tiles manufacturing player Milo Tile for ~Rs100mn.

Source: Company

Revenue Streams

In-House Mfg.

Manufacturing Outsourcing

Contract Mfg.

Sanitaryware

CP Fittings/Faucets

Sanitaryware

CP Fittings/Faucets

Imported Sanitaryware

Lifestyle products like shower temple and bathe cubicles. PVC cistern, seat covers etc. and other accessories.

Vitrified and Ceramic Tiles

25

CERA has niche institutional, government and PSU clients base over many years

Source : Company; RSec Research

Leadership Team

Name Designation Profile

Mr. Vikram Somany Founder and CMD Mr. Somany, who founded the business in 1980, has deep industry knowledge and experience. With hands on involvement in initiating and executing strategy, he drives high governance standards. He is a science graduate with FCMI degree from the UK.

Mrs. Deepshikha Khaitan Joint MD and Vice Chairperson

Mrs. Khaitan, who has been actively associated with CERA for over 8 years, is involved in design, innovation, product, R&D, channel outreach and sales. She is a graduate in economics and holds a law degree as well.

Mr. Atul Sanghvi CEO & Executive Director Mr. Sanghvi, who holds an MBA (Marketing) has experience of 35 years and has been a part of CERA’s leadership for over 21 years. He oversees all aspects of manufacturing, marketing and corporate affairs.

Mr. Rajesh B Shah CFO / COO (Fin. & Comm.) Mr. Shah – a commerce graduate, who has been associated with CERA for 34 years – leads finance, commercial, banking, budgeting and cost control functions.

Mr. Ayush Bagla Executive Director Mr. Bagla – who holds B.A. (Business) from Franklin & Marshall College, USA – has 24 years of experience in fund management and private equity. He has been managing IR and strategic planning initiatives.

Mr. P. K. Shashidharan President – Marketing Mr. Shashidharan – who holds a masters degree in English and has total experience of 39 years – has been associated with CERA for 28 years. He is responsible for devising media and marketing strategies and their execution.

Mr. Abbey Rodrigues President – Sales Mr. Rodrigues, who is a commerce graduate and holds PGDMSM having a total experience of 25 years, has been associated with CERA for 23 yeras. He manages pan-India sales team, an responsible for dealer interactions, market feedback and CRM etc.

Mr. Inderjit J Singh Mr. Singh, who is a mechanical engineer and has been associated with CERA for 13 years, founded faucetware manufacturing at CERA. He is responsible for production and development activities of faucets. He has been a part of developing polymer plant.

Source: Company

26

Shareholding Pattern

Holder's Name % Holding

Promoter & Promoter's Group 54.48

Muual Funds 10.21

FPIs 15.25

Non-Institutions 12.1

Bodies Corporate 3.52

Others 4.44

Key Institutional Shareholders % Holding

UTI MF 3.46

DSP Small Cap Fund 3.26

L&T MF 2.06

Nalanda India Equity Fund 9.98

Old Well Emerging Markets Fund 1.01

Source: Company

27

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position(s) in any specific security on which views/opinions have been made in this Report, during its preparation. RSL’s Associates may have other potential/material conflict of interest

with respect to any recommendation and related information and opinions at the time of publication of research report. RSL, its Associates, the research analysts, or their relatives might

have financial interest in the issuer company(ies) of the said securities. RSL or its Associates may have received a compensation from the said issuer company(ies) in last 12 months for the

brokerage or non brokerage services.RSL, its Associates, the research analysts or their relatives have not received any compensation or other benefits directly or indirectly from the said

issuer company(ies) or any third party in last 12 months in any respect whatsoever for preparation of this report.

The research analysts has served as an officer, director or employee of the said issuer company(ies)?: No

RSL, its Associates, the research analysts or their relatives holds ownership of 1% or more, in respect of the said issuer company(ies).?: No

Copyright: The copyright in this Report belongs exclusively to RSL. This Report shall only be read by those persons to whom it has been delivered. No reprinting, reproduction, copying,

distribution of this Report in any manner whatsoever, in whole or in part, is permitted without the prior express written consent of RSL.

RSL’s activities were neither suspended nor have defaulted with any stock exchange with whom RSL is registered. Further, there does not exist any material adverse order/judgments/

strictures assessed by any regulatory, government or public authority or agency or any law enforcing agency in last three years. Further, there does not exist any material enquiry of

whatsoever nature instituted or pending against RSL as on the date of this Report.

Important These disclaimers, risks and other disclosures must be read in conjunction with the information / opinions / views of which they form part of.

RSL CIN: U65990MH2005PLC154052. SEBI registration no. (Stock Broker: INZ000172433, Depository Participants: CDSL IN-DP-257-2016 IN-DP-NSDL-363-2013, Research Analyst:

INH000002384); AMFI ARN No.29889.

Change in Ratings

We have now only BUY and SELL Recommendation and have discontinued HOLD Recommendation.

We now have 2 Year Target Price and have discontinued with 1 year Target Price.

Score For < 5 Red High Risk For 5 Blue Medium Risk For > 5 Green Low Risk

Total Score (%) For < 50 Red High Risk For 50 Blue Medium Risk For > 50 Green Low Risk

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