Highlights of the Concall

• The company's has reported 9% drop in net profit to Rs 19.07 crore for the quarter ended June 2019 on 5% drop in total income from operation to Rs 267.35 crore for quarter, on account of subdued demand environment and the company focus on balance sheet discipline amid heightened competitive intensity. The company's sanitaryware segment revenue declined by 12% (52% of revenue) on account of consumption slowdown scenario amid sluggish real estate, while faucetware segment revenue rose 10% ( 25% of revenue) and tiles segment revenue grew 4% (20% of revenue).

• The Company implementation of IND AS resulted in depreciation and interest cost rising to Rs 7.67 crore and Rs 1.14 crore, respectively.

• The Company expects pricing power to return on the absorption of the unsold Morbi inventory of tiles. Also, it expects the NGT order banning coal gasifiers and the GST compliance to lead to higher overall costs for Morbi manufacturers. This would bring back pricing power to the formal sector.

• The Company expects demand in the RS 4000 crore sanitaryware sector to improve by end-H1FY20. At present, the top-3 manufacturers fulfill ~50-60% of sanitaryware demand, with Cera commanding ~24% of the regulated market.

• The Company expects high single-digit growth in the Rs 14000 crore regulated tile sector.

• The company commissioned a 2,500-piece-a-day state-of-the-art faucet plant, with present capacity of 7,200 pieces a day, scalable to 10,000. The Rs 8000 crore faucet sub-segment is more fragmented, with regulated and non-regulated manufacturers holding a 50% share each. Of the Rs 8000 crore faucet industry, Cera's share was Rs 3200 crore.

• The Company plans to focus on penetration in faucetware in order to gain from the higher replacement market. The Company maintains tight control over receivable days (55.4 days in Q1FY20 as compared 54.6 days in corresponding previous quarter).

• The Company plans Rs 56 crore CAPEX for FY2020. Of the total, the Company plans to spend Rs 4 crore for logistics/warehouses/IT services, Rs 4 crore for customer touch points, Rs 17 crore for staff colony and curry plant in Mehsana, Rs 9 crore on faucet automation, and Rs 20 crore for sanitaryware automation.

• The Company plans to spend 4.5% of topline for Advertisement and brand building for FY20.

• The Company expects revenue to grow 15% and margins be ~15% in FY20.