Is Cera Sanitaryware's performance slowing down?

High raw material cost impacted the performance of Ahmedabad-based sanitary ware company Cera Sanitaryware for the quarter to June. While the company posted a strong revenue growth of 40%, the net profit growth faltered to 21% compared to a 40%+ growth witnessed in the preceding three quarters.

Raw material cost grew 62% - much higher than the revenue growth. It constituted 43.5% share of the revenues compared to 37.4% a year ago. This impacted the operating margins of the company and the margin weakened 150 bps year-on-year to 15.7%.

The company's stock has appreciated 83% in the last one year, rising from Rs 288 to Rs 527 trailing the company's strong performance in the preceding four quarters. The stock is valued at a little over its annual net sales of Rs 524 crore - with room for further appreciation.

It remains to be seen whether the June quarter performance is an aberration. However, given the high base effect, the revenue growth rates are likely to slow down from the September quarter. Investors can expect the stock price to consolidate at the current levels - in the absence of any positive trigger.