Motilal Oswal Initiates Coverage of Cera Sanitaryware, Sets Price Target at Rs 5,990

Cera Sanitaryware Sees Healthy Demand Momentum in 4QFY26

Cera Sanitaryware (CRS) has continued to experience a healthy demand momentum in the fourth quarter of FY26, following a notable 11% revenue growth in the third quarter. This growth is a significant improvement from the less than 5% growth witnessed in the second half of FY24. In a recent interaction with management, optimism was expressed regarding the company's prospects for double-digit growth in FY27. Additionally, the gradual disappearance of one-off cost factors is expected to lead to an expansion in margins in the coming period.

The company's production remains unaffected, supported by a stable gas supply from Gail (100%) and Sabarmati (80%). We maintain our earnings estimate for Cera Sanitaryware and anticipate an 11% compound annual growth rate (CAGR) in revenue, a 23% CAGR in earnings before interest, taxes, depreciation, and amortization (EBITDA), and a 20% CAGR in profit after tax (PAT) over FY26E-28. Furthermore, the EBITDA margin is expected to recover towards 16%.

Outlook and Valuation

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Cera Sanitaryware is expected to have a high cash surplus of approximately INR10 billion in FY28, which will enable the company to navigate challenging times. Following a correction of approximately 15% in the scrip from its February 2026 high, the company's scrip appears attractive at a price-to-earnings (P/E) ratio of approximately 19x for FY28E (compared to the 10-year average of 33x). Based on this analysis, we are upgrading our rating on Cera Sanitaryware to BUY with a revised target price of INR5,990, based on a P/E ratio of 25x for FY28E.