Cera Sanitaryware (Cera) reported a muted Q3FY21 performance led by operational disruption in one of the plant due to labour issues. As per the management commentary, lower production due to one of the plant shut down for 82 days led to lower net sales by Rs 650 million and EBITDA by Rs 100 million. On a positive note, the company guided that all the plants are operational at 100% capacity from January, 2021. Net sales declined by 1.7% YoY to Rs 3,158 million, while EBITDA came in at Rs 432 million, marginally up by 0.6% YoY. The company reported net profit of Rs 307 million, up by 8.3% YoY.

The management reiterated positive outlook on strong demand in both retail and institutional segments. Cera's focus on improving product mix, reducing working capital cycle and strengthening distribution reach bodes well for future earnings growth.

Commenting on the results review, IDBI Capital Markets & Securities said, "We have revised our net sales and PAT estimates by 16.1%/4.3%/3.4% and 17.7%/4.1%/5.4% over FY21E/FY22E/FY23E respectively. Though we like Cera in building material space, we believe current valuations are expensive."

"We downgrade the stock to Reduce from Accumulate with a revised TP of Rs 3,088 (earlier Rs 2,930) assigning 27x PER (unchanged) on FY23E," the broking firm added.

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