Cera Sanitaryware Receives 'Sell' Rating Amidst Poor Long-Term Growth

Cera Sanitaryware, a midcap company in the ceramics/marble/granite/sanitaryware industry, has recently received a 'Sell' rating from MarketsMOJO on October 17, 2024. This downgrade is based on the company's poor long-term growth, with net sales growing at an annual rate of 6.69% and operating profit at 8.98% over the last 5 years.
In the latest quarter, Cera Sanitaryware's results have been flat, with a decrease in PAT(Q) at Rs 47.06 crore and a growth of -6.51% in net sales (Q) at Rs 400.71 crore. The company's PBDIT(Q) has also been at its lowest at Rs 58.06 crore. Technically, the stock is in a mildly bearish range, with multiple factors such as MACD, Bollinger Band, KST, and DOW indicating a bearish trend.

The company's performance has been below par in both the long-term and near-term, with a -13.51% return in the last year and underperformance compared to BSE 500 in the last 3 years, 1 year, and 3 months. However, Cera Sanitaryware does have some positive factors, such as high management efficiency with a ROE of 15.41% and a low debt to equity ratio (avg) of 0 times.

In terms of valuation, the company has a fair valuation with a 7.7 price to book value and a ROE of 17.8. It is currently trading at a fair value compared to its average historical valuations. However, its PEG ratio of 44.8 indicates that its profits have only risen by 0.4% in the past year, despite a -13.51% return in the stock.

Cera Sanitaryware also has a high institutional holding of 28.75%, indicating that these investors have better capability and resources to analyze the company's fundamentals compared to retail investors. With a market cap of Rs 10,350 crore, it is the second biggest company in the sector, behind Kajaria Ceramics, and constitutes 20.16% of the entire sector. Its annual sales of Rs 1,851.49 crore make up 12.31% of the industry. Overall, while Cera Sanitaryware may have some positive aspects, its recent downgrade to 'Sell' by MarketsMOJO suggests that investors should approach this stock with caution.