Ladies and gentlemen, good day and welcome to The Q3FY25 Earnings Conference Call of Cera Sanitarywere Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Devrishi Singh of CDR India. Thank you, and over to you, Mr. Singh.
Thank you. Good morning, everyone, and thank you for joining us on Cera Sanitaryware Limited's earnings conference call for the Q3 and nine months of the financial year 2025. The earnings of this period were announced yesterday. We have with us today the management team comprising Mr. Vikas Kothari, CFO, and Mr. Deepak Chaudhary, VP Finance and Investor Relations. We will start with brief opening remarks from the management, following which we will open the call for Q&A. A quick disclaimer before we begin: some of the statements made in today's conference call may be forward-looking in nature, and a detailed note in this regard is contained in the results documents that have been shared with all of you earlier. I will now turn the call over to the management for their opening remarks. Thank you, and over to you, sir.
Thank you, Devrishi. Good morning, everyone. On behalf of the management team of Cera Sanitaryware Limited, I would like to welcome you all to our earnings conference call. I will begin by sharing some updates on the operation and strategy, following which our CFO, Mr. Vikas Kothari, will run you through the key financial highlights. In Q3FY25, while we initially witnessed early signs of demand improvement, market conditions remained challenging as persistent headwinds continued to suppress growth. As a result, demand did not pick up as expected previously. Despite these headwinds, we achieved a 2.9% year-on-year growth, increasing revenue from INR 437 crores to INR 449 crores. EBITDA for the quarter stood at INR 71 crores, reflecting a 5.2% growth on a YoY basis. Our sanitaryware and faucetware segments contributed 50% and 37% to our revenues, with the B2B segment gaining traction even as retail demand remained subdued.
Our strong brand equity, diverse product portfolio, operational discipline, and inherent strengths helped us navigate most of these macro-led demand challenges to a large extent, reducing the impact that would otherwise have been more significant. Cera, our flagship brand, continues to demonstrate resilience and is expected to sustain its growth trajectory in the long run. At the same time, we continue to take necessary initiatives to strengthen our presence in the growing luxury segment, with Senator emerging as a new horizon alongside Cera Luxe. These brands cater to evolving consumer preferences with a diverse range of offerings, including Red Dot Award-winning electronic toilets, designer art basins, colorful sanitaryware and faucet fixtures, thermostatic diverters, and high-performance showers, and a comprehensive range of wellness products such as Oxy Spa and air and water massage bath tubs. Our product development efforts are progressing well.
In Q3 FY25, we successfully developed 158 new SKUs in the Senator brand and launched 104 new SKUs under the Cera brand. Alongside continuous innovation, we are expanding our exclusive store network and enhancing product displays. By the end of FY25, we aim to establish 20 to 25 exclusive Senator stores, and thereafter, we'll establish another 50 stores in the following year, enabling scaling up to 75 stores by FY26. In existing stores, we are ramping up displays with luxe products set to be showcased in over 100 existing stores by the end of next year. Further, we are strengthening our tile offerings with a focus on high-end value-added products, including large 6x4 slabs.
While our expansion in the luxury segment will take some time to translate into significant results, we are confident that our strategic efforts will position us well to capitalize on its long-term growth potential of the segment. The expansion of our faucetware manufacturing capacity to 4 lakh units per month continues to yield positive results, with utilization rates improving sequentially. We see strong replacement demand in this segment, which presents a significant growth opportunity. While demand in the sanitaryware segment has remained subdued in the recent months, we are confident that the growth trajectory will regain momentum as the overall market environment improves. The B2C segment has been sluggish, but with evolving consumer preferences, urbanization trends, and the gradual recovery in the real estate, combined with regular cycles of renovation and upgradation, we expect demand to pick up over time.
The Union Budget announced on February 1, 2025, introduced several positive measures aimed at boosting consumer sentiment and discretionary spending. The reduction in income tax rates is expected to enhance disposable income, thereby increasing home buyers' ability to spend and hence stimulating demand in the building materials industry. Additionally, the allocation of INR 15,000 crore under the SWAMIH Fund to complete 12 housing projects is anticipated to accelerate the completion of over 1 lakh housing units, further supporting the real estate sector. These initiatives are expected to positively impact market demand for our products. On the production front, our focus remains on optimizing production efficiency and balancing inventory. Faucetware capacity utilization stood at 91%, while sanitaryware capacity utilization was 90% during the quarter. These levels ensure that we are well-positioned to meet anticipated demand in the future.
Our planned Capex for FY25 stands at 25 crores, with ₹15 crores already deployed during nine months FY25. These investments are directed towards manufacturing enhancements, retail experience improvements, and IT infrastructure advancements, all aimed at strengthening our operational efficiency and product quality. Our advertising and marketing spend for the quarter stood at ₹14 crores as compared to ₹22 crores in Q3FY24. The company continues to reap the benefits of the sustained efforts it has undertaken in this area over the years. Our brand ambassador, Kiara Advani, along with our advertising tagline, "Cera, this is your space, play it your way," has played a key role in enhancing brand recall, while targeted advertising across multiple platforms ensures widespread visibility. Additionally, we have increasingly leveraged social media platforms such as LinkedIn, Instagram, Facebook, and YouTube to reach niche audiences.
Collaborations with social influencers have further amplified our brand presence, driving deeper engagement and increasing visibility among younger, digitally savvy consumers. The retailer loyalty program remains a key initiative in strengthening our engagement with channel partners. As of Q3FY25, we have enrolled 23,000-plus retailers, with more than 4 lakh invoices recorded under the program. Retail sales linked to the program contributed to 42% of the total retail revenue, reinforcing our strong retailer engagement. While demand in the B2C segment remains sluggish, the B2B segment continues to gain momentum, contributing 35% of the Q3FY25 revenues. This shift underscores our ability to cater to institutional buyers, developers, and large-scale projects, reinforcing Cera's position as a preferred brand in the industry. Maintaining an optimal mix of B2C and B2B sales remains a priority, allowing us to enhance sales predictability while capitalizing on diverse market opportunities.
To summarize, Q3FY25 continued to reflect a sluggish demand environment. However, as we are reaching the end of the fiscal year, we anticipate closing the year with lower single-digit growth only. Going forward, Cera is strategically positioned to capitalize on the anticipated recovery. Our diverse product portfolio, continuous introduction of new SKUs, and extensive dealer networks enable us to meet evolving customer preferences effectively. With over four decades of industry expertise, a well-established brand, strong management, a robust balance sheet, and disciplined financial practices, Cera remains committed to upholding strong corporate governance. Furthermore, our in-house manufacturing and R&D capabilities strengthen our competitive edge, ensuring we are well-equipped to navigate short-term challenges and create long-term value for all stakeholders. With this, I would like to hand over to Mr. Vikas Kothari, our CFO, who will present the operational and financial highlights for the quarter ended 31st December 2024. Thank you, and over to you, Mr. Vikas Kothari.
Thank you, Deepak. A very good morning to everyone. I will now provide a brief overview of the company's financial performance for the quarter and nine-month period ended 31st December 2024. In Q3FY25, revenue from operations stood at ₹449 crores as against ₹437 crores in Q3FY24, registering an increase of 2.9%. EBITDA excluding other income in Q3FY25 stood at ₹59 crores on the same line as Q3FY24. EBITDA margins excluding other income for the current quarter stood at 13.2% as against 13.6% in Q3FY24, registering a marginal decrease of 40 basis points. This decline in margin was mainly on account of increased operating expenses, which is partially offset by favorable publicity spends. Gas prices remained favorable during the quarter. The average gas price from GAIL was ₹28.29 per cubic meter in Q3FY25, as opposed to ₹28.78 per cubic meter in Q3FY24.
The average gas price from Sabarmati, which rose to INR 55.41 per cubic meter in Q3FY25 from INR 47.56 per cubic meter in Q3FY24. This positive trend is further supported by increased drawals of gas from GAIL, reaching 81% in Q3FY25. The weighted average cost of gas in Q3FY25 was INR 33.53 per cubic meter, which is notably below the industry average. Gas cost constitutes 1.56% of our total revenue. For the quarter under review, revenue contributions were as follows: sanitaryware at 50%, faucetware at 37%, tiles at 11%, and wellness at 2%. On a YOY basis, faucetware revenue increased by 6%, tiles by 5%, wellness increased by 24%, while sanitaryware revenue marginally decreased by 0.3%. The sanitaryware and faucetware segments remain the cornerstone of our business and have contributed 87% of the total revenue.
In Q3FY25, 44% of our sales were in premium category, 34% in mid category, and 22% at entry-level category. Profit after tax was INR 46 crores in Q3FY25 as compared to INR 51 crores in Q3FY24, registering a decrease of 9.9%. EPS for the quarter stood at INR 35.56 versus INR 39.12 in Q3FY24. In terms of the working capital management, inventory days increased from 79 days to 85 days, receivable days from 27 to 33 days, and payable days decreased from 46 days to 42 days. Consequently, the net working capital increased from 60 days to 76 days in Q3FY25. Regarding the sales distribution, Tier 1 cities accounted for 35% of our total sales, Tier 2 cities 21%, and Tier 3 cities lagged with 44% of total sales. For the nine months ended 31st December 2024, the company reported net revenue of INR 1,337 crores, registering an increase of 1% on YOY basis.
EBITDA excluding other income was at INR 185 crores, a decrease from INR 202 crores in nine months FY24. Profit after tax stood at INR 161 crores, with a slight decrease from INR 164 crores in nine months FY24. Overall, the company maintained stable revenues and profit on YOY basis. As of December 31, 2024, our cash and cash equivalents stood at INR 662 crores, marking a decrease of INR 106 crores, or 13.8% compared to the previous corresponding quarter. This reduction was mainly on account of buyback offering during the Q2. In conclusion, I would like to reiterate the company's confidence in its ability to improve overall performance going forward. As the demand cycle strengthens, we are well-positioned to capitalize on improving market trends. Cera remains committed to maintaining strong financial discipline, optimizing resource utilization, and further enhancing its financial performance in the coming quarters. With this, I would now request the moderator to open the line for Q&A. Thank you very much.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Archana Gude from IDBI Capital. Please go ahead.
Hi, sir. Thank you for the opportunity. I have two questions. Firstly, on the margin front, this is a consecutive Q2 wherein this B2B segment has done better for us compared to retail. And given overall commentary by the even other companies, it doesn't look like the recovery will be very sooner than expected. So in that context, achieving margin of 16%-17% in near-term may be challenging. Your comments on this would be very helpful, sir.
So Archana, regarding the margins, like we have already addressed many times in the past also, so despite these challenging market conditions, the company maintained the consistency as far as the performance in preserving the margins are concerned. If you see EBITDA without other income for the quarter, it stood at the same line with what was there on YOY basis, reflecting our stability in earnings. And when we talk about the marginal decline, which is there on an overall basis to maintain 16%, so largely it is the demand factor. So we think that once this demand will improve, definitely the margins will come back to the estimated 16%-17%.
Sure. What are any tentative guidelines you'd like to give us? Maybe somewhere edge to FY26, we will be back to that kind of margin.
Yeah. So we are just, as far as our efforts are concerned, even if we are not seeing any substantial growth as far as revenue drive is concerned, but in terms of the margins, we are quite confident that we are going to achieve this 16%-17% in the next one or two quarters.
Sure. So now over here, I'd like to just mention one other thing apart from what Mr. Vikas said. A large portion of this drop in margin is coming on account of a little bit of extra discounts which are going on because of the sluggishness which is prevailing in the market. As soon as the market starts improving, you'll find that we have kind of already toned down on the discounts. We have taken it like at a bottom level right now. We're not increasing discounts any further. But with the improvement in the margin and with the improvement in the sales, you'll find that as soon as we start rolling back the discounts, those margins which have dropped by, let's say, we are at 13.5% right now, will again go back to that level which were earlier, 16%-17%.
Sure. That was helpful, sir. So secondly, the price hike what we took in Q2, so were there challenges on getting it absorbed given that demand is very sluggish? And maybe was it that it was the wrong timing by our end?
Regarding the price hike, what we have taken in the last quarter, mainly in case of faucetware, the faucetware, if you see the segment, it has consistently growing as reflected in our past performances in few quarters also. In this quarter, quarter three, financial year 2025, we recorded a YOY growth of 6%. While this growth appears lowered compared to the quarter two financial year where we have achieved roughly 20% growth in faucetware, it is important here to note that the last quarter's performance was partially influenced by a price increase in faucets. Ahead of this price adjustment, dealers stocked up beyond their immediate requirement, which is roughly contributing an increase of 8%-10% of additional sales in quarter two. As a result, some of those excess stock were liquidated in quarter three, impacting growth figures.
Despite all these, we still achieved a healthy growth of 6% on YOY basis, which reinforces the strength and demand for our faucetware segment.
Okay. And so maybe lastly, I'll just finish my question.
If you may remember, like in the previous phone call also, when we had taken the price increase, the primary reason for taking the price increase was a sharp movement in the brass prices, which is a constituent of, you can say, a predominant constituent of the total cost of the faucetware. It was an increase of something like 20% in the first three, four months. Then it stabilized, but still it will be in the region of 8%-10% over the March numbers. So that price increase was kind of absolutely essential not only for us, but for all the players in the industry if they want to maintain any kind of decent margins on the product.
Okay. And so maybe lastly, now last one more question. So we had this flattish net sales in nine months of FY25 on YOY, and given the situation, so are we still sticking with this higher single-digit kind of sales growth for FY25 full year?
No, we will not be ending with a higher single-digit growth for FY25. We will be more in the lines of lower single-digit growth.
How has the January and half of February has done for us?
January and February till date has been better than what was there in the last on a year-on-year basis. But still, we don't anticipate we'll be ending up with high single-digit growth as we predicted earlier. It will be more in the lines of lower single digits.
Okay. Thank you so much, sir, and all the best. Thank you.
Thank you.
Thank you. The next question is from the line of Mithun Aswath from Kiva Advisors. Please go ahead.
Hi, sir. Just wanted to understand the sense we are getting when we listen to companies on the paint side are saying demand may have bottomed out, and they're seeing some green shoots in January and February, and actually may have started in December. Are you seeing similar trends where maybe the demand has bottomed out and there is some pickup in demand even at the consumer side, or is it too early to say that demand is starting to improve?
So, speaking to your question, which is futuristic one, so as far as demand is concerned, and especially when we talk about the building material industry, as such, we do not showcase this thing that whether the bottom has come or not because still the challenge is largely in the retail segment is going on. So, projects, no doubt, there are increases in the project bank.
But as far as retail market, which is largely impacting the slowness or sluggishness in demand, it is still continuing. And our understanding is that with the recent budgets what has been delivered by our finance minister, and after that, the relaxation in interest rates which has come through RBI, so this will bring some sort of strong momentum in terms of the spendings which were hold for a period of time. But still, it will be tough in the coming next one or two quarters.
Right. I just wanted to understand. I think it's been now maybe a couple of years where there's been stagnation of growth. In your own history, you see a trend maybe post-COVID. There was this big bump up which happened across the building material side. Then you've had maybe two, three years of sluggishness. Do you see that cycle typically in your history? And then are you seeing maybe rural demand being better than urban right now, sir?
I see you're correct that there has been a boom just after COVID. And the sluggishness started roughly two, three of financial year 2023, 2024. And it has been something like four, five quarters now that the sluggishness has continued. So as Mr. Vikas said, there have been some green shoots which have come up on the project side. We are expecting that with the kind of project and the interest rate reductions which have happened, it should start improving on the retail side also. It will be very difficult to have any kind of predictions till it actually starts reflecting on the ground level. We'll have to wait maybe for Q4, and maybe at the Q4 phone call, we'll be able to give you a better idea in respect of how we are anticipating the immediate near future, like how we anticipate it to grow up for the retail segment.
Just one last question was on your expansion. You had identified some land, and you were looking to put up a facility. Obviously, considering the demand conditions, you may postpone that. But considering our healthy balance sheet, do you think it makes sense for us to be ahead of the market and expand? Or what are your thoughts there? And have you been able to gain market share against the competition since there has been a sluggish market? Just wanted your thoughts there.
Regarding the greenfield part, I think we have already addressed in our Q2 concall also. As far as the land acquisition is concerned, the land acquisition with respect to greenfield is completed. And the projected completion, once it will start, it will take roughly 18 months from the zero date. But as we have informed, it is not expected from our side that the expansion will start in the current financial year, looking to the market instability. The start date we will revisit once the end of the financial year. Now, coming to the question that in future, if there is any going to be any sort of demand, and this can be the better opportunity to get the plant constructed at this stage. We have the mitigating plans already built up, which can be catered through three arms. One is the inventory base what we have built up, which can suffice the requirement in terms of shoot-up of demand. Second is the capacity utilization. Currently, we are smartly managing our production and inventory, and this is that we are not utilizing our plant capacities fully, so that can reach out to the fullest level.
And thirdly, we have the very flexible outsourcing model, which can support in terms of whenever there is the shoot-up is there in demand. So all these factors will make us more comfortable in terms of meeting the demand. But bringing the plant at this point of time, we will address this thing once we end this financial year. And then we will take a suitable decision in terms of the operating plans, what we are going to prepare for the next financial year, and how we see and drive the growth in the next coming two years. And on your second question with respect to the market share, so as such, if you have seen, all the peer companies are delivering the similar, more or less, they are all facing the demand pressures, and the numbers are not good. So market itself has shrunk.
So, I don't think there is a question of any sort of decline in market share or something which has gone out of from one sector to another sector. So, this is a short-term, whatever the influence which is going on across the industry, is the pain has been taken by all of us. And we are quite hopeful that with this real estate business, where the project launches have increased, in our case, it has increased by 15% if we compare with March. And their construction will soon start from the next financial year. So, things will be getting back to normal. But retail market, which we see that still it is sluggish, still a few initiatives which are taken by the government and the RBI. So, we are hopeful that they will be converting into the demand scenarios they picked up.
Got it. But typically, you've historically not done too much of.
Thank you, Mr. Mithun. May I request you to please join the queue?
Sure.
Thank you. Ladies and gentlemen, we request you to kindly restrict your questions to two per participant, as we have many participants in the queue. The next question is from the line of Praveen from PL Capital. Please go ahead.
Yeah. Thank you for the opportunity. So the first question is related to your commentary. So you had mentioned extra discount given, which has led to some contraction in the margin. While I can see that your gross margin on the sequential basis has up, whereas your operating margin has a down. So is that increase in operational expenses has led to the contraction in operating margin or the discount?
So it's a mix of both. The discounts have gone up. And obviously, because of the passage of time, inflation also plays a role. And so the other costs which are post the gross margin, they have also gone up. So both have played a part. But as of now, if you compare on a year-on-year basis, our margins would have improved had the discounts that we are passing on right now not been at the same level at which they are right now. So it's a mix of both. You're right.
So basically, that's a discount is continuing from the last nine months. And that's the interpretation we can assume because sequentially, it's not a contracted gross margin.
Correct. The increased discounts have started from Q3 FY24. So they have continued from that point of time. And we have kind of bottomed out right now. The discounts are not increasing.
Okay. And also, if you can give the nine-month price hike in the faucet and the sanitaryware. And also on the guidance, are you sticking to INR 29 billion by March 2025? That's it, and.
Regarding the price hike, the price hike what we have taken is average 6% in case of faucetware and 1% in case of sanitaryware. When it comes to the appearance, it may be seen that 6% YOY growth, which is in Q3, was solely due to this 6% increase announced in price hike. But this is not entirely the case because a direct 6% price hike does not immediately translate into 6% increase in average realization. This is because largely project orders have pre-agreed pricing, and the new rates will only apply for fresh orders only. If we see in terms of the real conversion of price rise in quarter three, effective price rise realized in quarter three was approximately 2%. Remaining was the growth driven by volume, that is 4%, to contribute to total 6%, indicating that the demand remains stable despite the market conditions.
The guidance, sir? Guidance you are holding is 29 billion.
Guidance. So definitely this question needs to be answered. So we are optimistic and committed in terms of meeting our projected target, what we have set, 2,900 by March 2027. This is supported by our strong project pipeline. And with the improvement, if it comes in the retail growth, we are confident that we are going to achieve these growth targets. However, there is a caveat that this is contingent upon the market recovering as expected. More we will come out when we will be having a better visibility, and we will, at the end of the financial year, we will be having better visibility and will provide a more detailed assessment at that point of time. Thank you.
Thank you, sir. All the best.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. So my first question is, what is the captive and outsourcing mix for sanitaryware and faucetware for Q3 nine months?
Yeah, because you can answer.
For Q3, you're asking for faucetware? I'll give you suggestion for both. For sanitaryware, the mix was 58% outsourced and 42% was manufacturing. And for faucetware, outsourced was 48%, manufacturing was 52%.
Sir, for nine months?
For nine months, it was for sanitaryware, outsourced was 57%, manufacturing 43%, and for faucetware, outsourced 48%, manufacturing 52%.
Right. So thanks for the data points. Just a related question. You indicated the land expansion, it's already done, and zero-date commissioning will be 18 months. Are we okay to increase the outsourcing pie to, say, 50%, 55%, 60% if we have to meet to our stated revenue numbers of INR 2,900 crores by March 2027? So till what level can we increase our outsourcing? What is the comfort level that the management has over there?
How this functions is that typically, as of now, we would be aware that the plant capacity utilization has also gone down. We had gone up to something like 120% of capacity utilization earlier. Now we are functioning at something like 80-85% in the last few quarters. And current quarter was something like, I think, 90%. So what has also happened once we have come down from 120% to 85% kind of a capacity utilization? Plus, the mix has also undergone a change. Typically, what we used to do was that most of the value-added and more complex pieces were manufactured in-house, whereas the simpler pieces are outsourced. So once the capacity utilization started getting impacted, to keep the plant running, we have changed the mix also. So we have bought in some of the materials which we were outsourcing. We have bought them in-house.
So once the demand starts improving, we'll have first scope for again changing the mix, taking those products which we have taken in-house, will be again outsourced. And once that mix, we are again back to the normal mix that we want to manufacture within the plant, then we can start increasing capacity and take it again to the levels which were there earlier. So if you really think about it, within the plant, the right optimal mix, we have scope for increasing capacity by, you can say, roughly 50%-60%. And then we would have the outsourcing also where we have a lot of scope for increasing kind of volumes. So we don't see any challenge in terms of next couple of years can be easily met with the kind of plant capacity which we are having right now in sanitaryware as well as in faucets.
Sure. And so my second question was on working capital deterioration. Could you please explain each of the line items on why the number of days either have increased or decreased?
I'll just give you the with the Vikas today. He had mentioned this during his remarks also, but I'll just give you the figures again. The total working capital days have gone up by 16 days, 60 days to 76 days. Now, inventory days have gone up from 79 days in Q3 FY24 to 85 days in the current quarter. Now, this, as we have been explaining earlier also, we need to kind of keep a kind of balance between the plant utilization and the inventory level. So with the demand not really picking up, we have to keep the plant running at a particular level. So inventory has gone up slightly, but we don't see a challenge over there because once the demand picks up, this can be liquidated on a, you can say, over a period of time. The receivable days have gone up from 27 to 33.
This has happened primarily because of the fact that we have changed our cash discount policy slightly during this quarter, due to which the proportion of CD sales has gone down from 76% to 70%. Now, the working capital days, the receivable days have increased, but it is also giving us benefits in way of the amount of cash discount that we are passing on, so we are reviewing this on a constant basis, and if we feel that the benefits are not being outweighed by the cost, then maybe we'll revert back to the old policy, and this can again be brought back to the levels which were there earlier. Now, the payable days have gone from 46 days to 42 days. This has primarily happened because of a change in the vendor profile.
In the last few quarters, the larger mix of our vendors have come in from the MSME sector because of the fact that in the MSME sector, you have to pay within 45 days. So that is why you find that the payable days have slightly gone down from 46-42 days. So we feel that inventory days are quite manageable as of now. We don't need to worry about it. The receivable days are again on account of this factor which I mentioned to you. And payable days is again within that 45 days kind of a margin which is set by the government for the MSME sector. So we don't see too much of a challenge in case of working capital.
Sorry to interrupt. May we request Mr. Ritesh Shah to please rejoin the queue? We have participants waiting for their turn. Thank you. The next question is from the line of Resha Mehta from GreenEdge Wealth. Please go ahead.
Yeah. Thank you. So on the demand front, you've highlighted that the project side has been doing better than the retail, right? So if for nine months FY25, you could just quantify what has been the growth in both sanitary and faucetware separately for projects and retail?
I think as far as projects and retail are concerned, so largely the composition is 65%-66% is in retail and 34%-35% is in projects, and especially the breakup between sanitary and faucet, if you see in case of sanitary faucet, it is more or less the same what I have stated on the total basis.
Okay. Okay. And this share has remained similar year-on-year basis, or would that have got skewed towards?
On nine-month basis, if you see the project portion has increased. So on a nine-month basis, if you see sanitary and faucet, retail is 62% and project is 37%, and 1% is exports. But we see in terms of the quarter three FY25, it is somewhat 65%-35%. So overall, YOY basis on nine-month criteria, the proportion of projects has increased by 2%.
And on a historical basis, if you talk about in a larger context, you'll find that typically our project to retail ratio used to be normally 30, 70. So now from the 30, 70, it has gone up to something like 35, 65.
35 to 37. Correct.
Right. But for a nine-month, it's 32, right?
37.
Sorry. Yeah. Okay. The other one was in your two brands, Luxe and Senator. So what would be the revenue salience of these two brands currently in our portfolio and the margins? And also, when we look at ad spends, since now we have three brands, right, and the luxury brands, the premium brands are also focused, how do we decide to spend between these three brands?
Both these brands, the Lux and the Senator brand, these have been just in the process of being launched. As of now, the revenues are not too great. It is more about we talk about the future. We have projected that once maybe down two years, two years to three years down the line, both these brands, the Lux and the Senator, should be constituting something like 10% of our total revenue. By March 2027, we are projecting INR 2,900 crores revenue for the company. The Lux and the Senator brand should ideally give you roughly INR 290-300 crores by March 2027. Senator is in the process of being launched. The target is that by the end of March, let's say month of April, we'll have roughly 20-25 stores which will be launched for the Senator brand exclusively.
Now, these would be completely separate from our current display stores which are there. They'll be at premium location kind of display that it will have the kind of selling experience that it will offer to the consumer. It will be completely different from what is being offered for the current Cera franchise. For Luxe, we are targeting something like 100 stores in the next one year. By financial year 25, 26, we should be having 100 stores which would be a mark for Luxe. Now, they would be mostly existing displays which will be upgraded and kind of stocked with the Luxe product profile. So the roadmap for these two are that we should be having roughly 75 stores for Senator by FY26 for Senator and 100 stores for Luxe.
Now, the margin profile for Senator and Lux would be significantly higher than what is there for the current Cera portfolio. But the exact things would be more it will take us more time to give you more concrete numbers because the pricing, positioning, etc., everything is being planned out. So maybe by Q4, I'll be able to give you more numbers in respect of how different the margins could look like.
Thank you. The next question is from the line of Udit from YES Securities. Please go ahead.
Yes, sir. Thank you for taking up my question. Just wanted your comments in understanding that we have seen new catalogs coming in from the large conglomerates into this segment, into the bathware space. So how do you see the competition panning out, and does that dent your margins going ahead, given it could be a volume push scenario for coming couple of years?
We have had these conglomerates coming in for quite some time in the past also, and we have found that it has been very difficult for them to translate their success in their respective fields onto the sanitaryware and faucetware. We have had paint companies which have come in before. We have had pipes companies which have come in before. We have had tile companies which have ventured into this space. They have not been able to do too great. We find that they go up to a certain number, let's say INR 40-50 crores kind of a number is what they typically achieve. But then they start finding that the kind of the margins and the kind of growth which they were anticipating is not really forthcoming in this sector.
Now, this is a real tough sector to crack, and we don't see too much of problems from the new incumbents apart from being more of an irritant. So we are more concerned with the existing players and the demand scenario which is currently playing out right now rather than the new entrants which have already come in or which are planning to come in.
Okay. So in the same line, the price hikes that you have taken for the first nine months, what were the average price hikes which your existing peers have taken?
In faucetware, you'll find that most of the players have taken a similar kind of price hike apart from maybe one player which did not take a price hike. In sanitaryware also, we took only 1% price rise, but our competitors have taken in the range of 4%-5% price rise. But what really happens is even when you're taking a price rise, with the kind of scenario which is prevailing right now, most of the competitors will be passed on their way of discounts.
Understood, sir. Thank you, sir. That's it.
Thank you. The next question is from the line of Subhankar Ojha from Marcellus Investment Managers. Please go ahead.
Thanks, sir, for taking my question. Just one question. So you mentioned that the stock levels have increased, and that is done to maintain the plant utilization at a minimum level. So yeah. And if we consider that the demand scenario is weak currently, and if we see that it continues for, let's say, six months, nine months down the line, so are we still planning to continue with that strategy of higher stock levels, or we might change it going forward as per the demand requirements?
I'll break up this question into two parts. One would be for faucets, and the other would be for sanitaryware. In case of faucets, you'll find that changing the plant capacity utilization is something which is extremely easy in the sense that most of the process is machine-driven, and most of the labor is also on a piece rate kind of a basis and on a contractual basis also. So cutting production over there is not too much of a hassle or a challenge. The proportion of fixed costs within the faucetware facility is also quite low as opposed to the sanitaryware facility. So you'll find that in faucetware, we don't anticipate too much of inventory building up going forward. But in case of sanitaryware, it's a slightly more difficult kind of a situation. It requires stricter kind of a balancing.
The reasons are because in case of sanitaryware, it is not easy to scale down on the kind of beyond the particular minimum level. One would be because of the fact that skilled labor in this particular category is very difficult to come by, especially in the casting process. You'll find that the laborers are highly skilled and difficult to come by. So even if we decide that we want to scale down on the production levels, it will not be really possible to let go of the skilled labor. So over there, there's a higher kind of a challenge in respect of kind of reducing the production levels beyond a certain point. But we are monitoring it on a continuous basis.
That is the reason that we had, as I mentioned earlier, changed the mix and taken some of the outsourcing products to the in-house manufacturing because we want to maintain it at a particular level. But you are right that if it continues for a very long period of time, then maybe we'll have to take again a review as to how we can manage the inventory levels and again the plant utilization also. But this is, as I mentioned earlier, more challenging for the sanitaryware and not so much for the faucetware.
All right, sir. Perfect. That's clear. Thank you very much.
Thank you. The next question is from the line of Akshay Chheda from Canara Robeco Mutual Fund. Please go ahead.
Yeah. So thank you for the opportunity. So just one question.
I'm so sorry to interrupt. Mr. Chaudhary, can you speak a bit louder? We are unable to hear you.
Hello? Is it audible now?
Yes.
Hello.
Please go ahead.
Yeah. So just sorry, but coming back to the demand, so I mean, we have changed our mix from 70%-30% to 65%-35%. B2B share is going up. So I understand that even from that 65%, that is the retail piece. We would be serving the B2B clients via the retailers. So effectively, if I understand, the demand driver for us would be, say, 70% from new construction and 30% should be from the replacement side. So why this retail side softness is impacting so much to us? Logically, there should be some uptick because you also said that B2B is doing pretty well for us. So even from the retail piece, B2B might be getting served. So still, why so much softness is there? And the related question is, is it that the competitive intensity has increased so much from the incumbents and, say, the Morbi players or the MNCs that is impacting us? So if you can talk, sir.
I'll address the second part first. Again, as I mentioned earlier, it is not so much about the competition intensity. Of course, they are coming at the fringes and taking away small, small numbers which would have otherwise maybe come to us or the unorganized sector. But it is not so much the competition from the new incumbents, but more about the demand situation which is playing out right now. To address your question, that bulk of the demand comes in from the new construction. So we have kind of found that the new construction portion, even apart from the metros, for the second- and third-tier towns, the construction activity has also slowed down, which is kind of affecting the demand over there also. So post this budget, we are hopeful that the spending should be increasing over there, and we should see an uptick. But we'll have to wait for a couple of quarters to see whether it actually translates.
Okay, sir. Okay. Thank you.
Thank you. The next question is from the line of Omkar Ghugardare from Shree Investments. Please go ahead.
Yeah. In this tough environment, how are you making sure that you increase your retail footprint so that you can at least tap that kind of market which is untapped as of now from your side?
Please, once the outside is tough, the most we can do is try to see what we can do within the company. So within the company, we have been doing quite a few things in order to optimize costs. Like I mentioned earlier, the discounts that we were offering have bottomed out. We are taking a lot of measures for cutting down costs. We have started looking at logistics, which constitutes something like 9%-10% of our total cost, how we can bring down the logistic costs. We started looking at how we can kind of bring down our labor cost. We have already initiated steps towards that direction. Earlier, most of our labor cost used to be in the nature of fixed cost.
Now, we are consciously trying to get it more towards a variable nature so that whenever we want, and if we want to cut down on production, we can actually bring down our labor cost also along with it. We have been looking at kind of reducing our insurance costs, which comes to something like INR 15-17 crores for our total on an overall basis. We have brought it down significantly and looking to bring it down even further. The benefit in respect of gas will continue because gas is something we take a lot of it from GAIL, which is not really impacted by the ups and downs which happen on the market rates kind of a thing. So the main idea is that while the outside continues to remain tough, we kind of keep on looking inside and see where we can do better.
We have also been trying to look at the areas that we are weak, like these markets where we are not doing too well. East continues to be an area where we are not doing too well. In the south, typically, we do well, but Tamil Nadu is a kind of weak market for us. So we are looking at, during these times, that we continue to look at the areas that we are weak and try to improve upon those areas. So the idea would be that in such time that the market outside starts improving, we keep on doing cost optimization and improving on the areas that we are weak. We started looking at the premium segment, the area of sanitary and luxury, in a very serious manner. And we have given the roadmap that we should be constituting 10% of our total revenues by 2027.
So the idea is that continue to do within ourselves till the time that the outside is tough. It was just reading a phrase the other day that success is the sum of small efforts repeated day in and day out. So small, small efforts we will continue to do till the market improves, and then we will be able to capitalize on the improvements that we have already done.
Okay. Thanks for the detailed answer. Another thing is that how are you adding the retail network? What's the strategy behind? I mean, to what level you want to grow or how it is growing?
For the retail network, on an each year basis, our target is to add something like 300-350 display centers. So typically, when we talk about a display center, it means taking a space within the dealer's showroom. So as of now, because we have the numbers, like retail showrooms, how many we have done in the current year, in the current quarter also.
Just give you the numbers. Retail shop number. So currently, as of December, we have around 1,682, 1,682, which is again categorized based on the size of the stores. So Cera Style Gallery, we are having around 280 stores. Then we have Cera Style Hub, 191. And then the smaller versions, that is Cera Style Centers, it is roughly around 1,273.
Thank you very much. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Thank you, everyone, for attending this call and for showing interest in Cera Sanitaryware Limited. Should you need any further clarification or would you like to know more about the company, please feel free to reach out to me or CDR India. Thank you once again for taking the time to join the call. Thanks and bye.
Thank you. On behalf of Cera Sanitaryware Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.