Disclaimer: The opinions in this report are for “informational and educational” purposes only and should not be construed as a recommendation to buy or sell the stock(s) mentioned. I do not recommend that you act upon any investment information without first doing an independent research as to the suitability of such investment for your specific situation.
Welcome to the tenth issue of Safal Niveshak StockTalk. (Read previous issues)
After covering BHEL last time, this time I’ve researched on Cera Sanitaryware Ltd. (CSL), one of India’s leading manufacturers of sanitaryware. Before we dive deeper into CSL, here is a brief overview of the sections of this report.
- About CSL
- Safal Niveshak’s 20-Point Checklist
- Intrinsic Value Assumptions
- Risk Statement
- Financial & Market Snapshot
- “Should I Buy CSL?” Checklist
CSL is one of India’s leading manufacturers of sanitaryware and faucet ware, with around 20% share of the organized market (Hindustan Sanitaryware leads the market with around 40% share, followed by Parryware).
Here is a graphical representation of the company’s products differentiated by market segments…
Image Source: Cera’s Corporate Presentation
Over the past 10 years, CSL has grown its sales and profits at average annual rates of 25% and 35% respectively.
Keeping in mind the simplicity aspect that is otherwise missing in other company analysis reports you would come across, I’ve analyzed CSL by answering 20 important questions that span its:
- Business performance,
- Financial performance,
- Management quality, and
- Competition.
Here is the complete 20-point checklist with my explanations.
Before we move ahead, here are the symbols that I’ve placed against each checklist point and that will tell you at a glance whether I have a positive or negative view on that particular point.
Indicates my positive view
Indicates my negative view
Let’s get started.
A. Business
1. Can I, in simple words, explain what the company does?
Yes. CSL is India’s third-largest manufacturer and seller of sanitaryware and faucet ware, with around 20% share of the organized market (Hindustan Sanitaryware leads the market with around 40% share, followed by Parryware).
2. Does the business have high uncertainty?
Not really. In fact, there’s a ready demand for CSL’s products given the construction activities in the country. As per the Census data 2011, just around 47% of the total Indian households have proper sanitation facilities. Around 69% of the total rural households and 19% of the total urban households still do not enjoy even basic sanitation access. However, things seem to be changing as improving literacy and thus hygiene levels are leading to a rising demand for sanitaryware products, thereby leading to growth in the industry and for players like CSL.
3. Has the business got an enormous moat?
Not enormous, but a reasonable one…proven by the average gross profit margins of around 39% over the past 5 years (>40% suggests a sustainable competitive moat). What is more, the company has consistently grown its sales and net profit over the past 10 years. An overall clean balance sheet adds to the comfort.
One concerning part, however, is that the company continues to spend a considerable amount towards sales and marketing costs, which while being a necessity in a highly competitive market, adds some pressure on profitability. Also, the company is in a growth phase and thus needs consistent cash infusion into setting up manufacturing and distribution facilities. This has been seen in a consistent negative free cash flow for the company.
I see the moat diminishing in the future given intensifying competition from both Indian and MNC manufacturers. In fact, CSL is yet to make a mark in the high end sanitaryware market, which remains the domain of Hindware, Parryware and other MNC brands.
4. Does the business generate strong free cash flow?
No, this is one negative for CSL. The company has seen pressure on its FCF in the past few years, largely led by sharp rise in inventory and also new capital expenditure. Also, given that its capacity utilization remains at near 100%, the company would continue to spend on new capacity expansion, which will continue to create pressure on cash flows.
Data Source: Ace Equity, Safal Niveshak Research
5. What is the bargaining power of suppliers and buyers?
The sanitaryware and faucet ware market in India is highly competitive, both in the organized and unorganized segments. This provides marginal bargaining power to CSL against both customers and suppliers (of raw materials). Whatever bargaining power the company has is only going to weaken in the future given that it is increasingly facing competition from new local and international manufacturers.
B. Financial Performance
6. Does the business have a consistent sales and profit growth history and is there room for future growth?
Yes. CSL has grown its net sales and net profit at average annual rates of 26% and 45% over the past 10 years. I see few reasons the company will not be able to grow at a decent pace in the future given the consistent demand for sanitaryware products in India.
Data Source: Ace Equity, Safal Niveshak Research
Plus, the company has recently entered into faucet ware manufacturing (current manufacturing capacity is 2,500 pieces per day, which it plans to raise to 7,500-10,000 pieces in the next 3-5 years). As per reports, the market size of faucet ware is more than double of that of the size of sanitary ware. This is thus going to add to CSL’s sales and profit growth in the future.
7. Are gross profit margins higher than 40%?
Gross profit margin (GPM) suggests the true profitability of a company’s operations. Buffett would generally like a company earning >40% margin, but this is true largely of consumer goods companies (which CSL is). As for CSL, the average GPM for the last 10 years has been around 37%, which is a reasonable number. The GPM reached a high of 43% in FY10 and has dropped to 38% since then.
Data Source: Ace Equity, Safal Niveshak Research
8. Is its operating cash flow higher than net profits?
Yes, except in FY12. A sharp jump in inventory in FY12 has a severe impact on operating cash flow.
Data Source: Ace Equity, Safal Niveshak Research
9. Is the debt to equity below 0.5 times?
Yes. CSL has a comfortable balance sheet and its debt to equity ratio stands at just around 0.25x.
10. Is the current ratio greater than 1.5?
Yes. CSL’s average current ratio has been around 1.8 times over the past 10 years, which is a comfortable number. As a general rule, a current ratio of 1.5 or greater suggests that a company can meet its short-term operating needs sufficiently. However, a higher current ratio can also suggest that a company is hoarding assets instead of using them to grow the business. While this is not the worst thing in the world to do, it is something that could affect long-term returns.
11. Does the company have a good dividend history?
No. In terms of dividend payout (amount of dividend paid as percentage of net profit), CSL has averaged just around 10% over the past 10 years. This is given that the company is utilizing excess cash to grow its capacities to meet rising demand for sanitaryware. So I won’t be worried about a low dividend till the time the company is able to generate good return on incremental capital invested in the business, which it has been able to do in the past few years.
12. Is the Altman Z score > 3?
Yes, the number for CSL is 3.8, which makes it safer against bankruptcy. Anyways, read more on the Altman Z-Score.
13. How capital intensive is the business?
CSL’s average capital employed per year during FY03 to FY12 (10 years) has been around Rs 900 million. Against this, the company has earned average net sales of Rs 1,380 million during this very period. This suggests that the capital turnover ratio has been around 1.5 time (requires Re 1 of capital for every Rs 1.5 of sales). This makes it reasonably capital intensive (higher the figure, lower the capital intensity).
14. Has it got a high and consistent return on capital and return on equity?
Yes. CSL’s average return on capital and return on equity have been around 23% and 19% respectively over the past 10 years, which are reasonably good numbers. What is more, the ROCE and ROE currently stands at around 34% and 26% respectively, which suggest the high profitability of the business. These return ratios however may come into pressure in the future owing to rising competition.
Data Source: Ace Equity, Safal Niveshak Research
C. Management Quality
15. Is the management known for its capital allocation skill and integrity?
On capital allocation, given CSL’s rising return ratios and that the management has not done anything foolish so far, I will give it a thumbs-up. As far as integrity is concerned, again there are no indications from the past that suggest any maliciousness from the management’s part, except the supernormal salaries that the company pays to its top management (which I’ll talk about below).
16. Has there been any substantial equity dilution in the past?
No, CSL has seen not major equity dilution over the past 10 years. The company has financed a large part of its capital expenditure through internal cash generation and marginal debt, which is a positive.
17. Are management’s salaries too high?
Here is where I find a red-flag with respect to CSL. Over the last four years, the salary paid to the father-son duo leading the company has been around 11% of net profit. This number stood at 14% in FY12 (it will come down in FY13 due to the unfortunate demise of the son). Anyways, such high levels of salary for people managing such a small business is concerning. This is in fact true of most family owned businesses. This is also notable because the promoters already own around 55% stake in the company and thus receive a huge amount as dividends.
18. What has management done with the cash in the past?
As discussed above, CSL has reinvested a large part of its cash into capacity expansion while paying out little as dividends. Given that the operating business is earning the company a good return, the cash utilization strategy has been positive.
D. Competition
19. Does the business face high competition?
Yes, and the competition is getting intensive. While the company’s management expects its market share to rise to 30-32% in 3-5 years, this seems highly unlikely given that competition is not going to stand still. CSL already does not command a good mind share as compared to leading Indian brands like Hindware and Parryware. I got his validated from speaking to my father who has been in the sanitaryware business for the past 30 years, plus some other dealers around my place. Rising competition will lead to pressure on pricing and thus margins, which may further dent FCF.
20. Has the management focused on market share or profitability in the past?
A combination of both, which is good.
Before I move into calculating the intrinsic or fair value range for CSL, let me make one thing very clear.
Intrinsic value isn’t a definite figure but just a ‘calculated’ value. In fact, the calculation of intrinsic value of a business mostly throws up a highly subjective figure. And this figure changes as estimates of variable like future cash flows are revised (given that the future is unknown).
Anyways, what I have done here is rather than arrive at a single intrinsic value figure for CSL, I have calculated the value using 3 different methods and then arrived at a ‘fair value range’ for the stock.
1. Net present value based on a 2-stage 10-year DCF
The discussion about the calculation of net present value using a discounted cash flow model (DCF) can be found in the 7th lesson of my free course on investing – Value Investing for Smart People…and also here.
CSL posted a “negative” Rs 200 m FCF during the latest completed fiscal (FY12), owing to a sharp rise in inventories and capacity expansion. In fact, the company’s FCF moves in a cycle – positive in years when there is no capacity expansion, and negative in years when the company adds new capacity. Given that the company is expected to 100% utilize this new capacity in the next few years, the new round of capacity expansion can be expected sooner than later.
In short, it’s difficult to estimate FCF for CSL with any certainty in the future. Also, given the intensifying competition that may compress margins, it may add to the pressure on FCF despite rise in net profits.
In such a scenario, it’s difficult to calculate a DCF value for CSL.
2. Earnings Power Value (EPV)
After DCF, the second most reliable measure of a firm’s intrinsic value is the value of its current earnings. This method is known as ‘Earning Power Value’ or EPV. This value can be estimated with more certainty than future earnings or cash flows, and it is more relevant to today’s values than are earnings in the past.
The formula for EPV of a company is:
Here, ‘R’ is the cost of capital.
CSL posted an adjusted EPS (earnings per share) of Rs 25.3 in FY12. If the company’s profits were to stagnate and remain at Rs 25.3 per share going forward, and applying the EPV formula here, I multiply Rs 25.3 with 1/15% (15% being my assumption for the opportunity cost of capital)
This gives me a value of Rs 169 per share, which is CSL’s intrinsic value as per the EPV calculation.
3. Pricing relative to 10 year average P/E ratio
True value investors, as Graham has prescribed, won’t pay a price based on the stock’s latest P/E or the company’s latest earnings. They will take a much longer term view…as long as 10 years.
Here, I have attempted to estimate the intrinsic value of CSL using the company’s last 3 years average earnings and last 10 years average P/E ratio. So the formula is:
CSL’s average P/E ratio for the past 10 years has been around 8.4 times, while its last 3 years’ average EPS has been Rs 21 per share. Based on the formula, CSL’s intrinsic value is coming to around Rs 173 per share.
4. Graham number
Graham number is the formula Ben Graham used to calculate the maximum price one should pay for a stock. As per this rule, the product of a stock’s price to earnings (P/E) and price to book value (P/BV) should not be more than 22.5 i.e., P/E of 15 multiplied by P/BV of 1.5.
But why did Graham specifically used a P/E of 15 and P/BV of 1.5? Why didn’t he use some other numbers?
Well, he thought that nobody should be willing to pay more than the AAA bond yield at that time. AAA bond yield at that time was 7.5%. Therefore, AAA P/E was arrived at 1/7.5 or 13.3, which was rounded up to 15. Similarly he thought that nobody should pay more than 1.5 P/BV for a stock.
Graham insisted that the product of the two shouldn’t be more than 22.5. In other words,
(P/E of 15) x (P/BV of 1.5) = 22.5
Put another way:
(P/E) x (P/BV) = 22.5
Price(sqr)/(EPS x BVPS) = 22.5
Price(sqr) = 22.5 x EPS x BVPS
Take the square root of both sides, and you get the equation for the Graham Number.
Applying this formula, CSL’s intrinsic value comes to around Rs 250 per share (taking EPS of Rs 25.3 and book value per share of Rs 110).
Fair Value Range
Based on the above calculated intrinsic values for CSL, I can arrive at a ‘fair value range’ for the stock. Here is how I calculate it:
High End of the Fair Value Range = [Average of above four intrinsic values] Low End = [(Average of above four intrinsic values) – (0.5) x (Std Dev)]
Based on this, the fair value range for CSL’s stock is Rs 174 to Rs 197. Assuming a margin of safety of 25% to the average of this range, the comfortable buying price for CSL’s stock comes to around Rs 140 using the intrinsic values calculated above.
Given that CSL’s current price of Rs 340 is around 145% higher than the above calculated comfortable buying price, I won’t buy the stock before it falls to (or near) my buying price (it needs to fall 59% to reach my buying price!).
This is a classic case of a reasonably good company but not a good investment. So I will keep the stock in my watch-list and maybe buy if it fits my investment criteria after falling to my comfortable buying price.
Let us test the above conclusion (that the current stock price of CSL is much higher than its intrinsic value) even more. To do this, here is what I do:
- CSL earned average FCF of Rs 122 million during the three years prior to FY12 (FY09-FY11). Assuming rising profits in the future, I take this Rs 122 million as the base for my DCF calculation. To it, I assume annual growth of 10% for the next five years and 8% for the next five. Also assuming discount rate at 15% and terminal growth rate of 2%, and adjusting for net debt, I arrive at a DCF value of Rs 117 for the stock.
- I also rework my intrinsic value calculation using the average P/E method. Here, as I mentioned above, CSL’s average P/E has been 8.4x in the past 10 years. Let’s assume that that the stock gets re-rated in the future and commands a P/E of 12x. So in the average P/E valuation method, I multiply last 3 years average EPS with a P/E of 12x. This gives me a fair value of Rs 248 per share.
- I don’t tweak the Graham number, because to calculate the fair value using this method, I’ve already assumed a P/E of 15x for the share, which is more than enough for a commodity-type company like CSL.
- For EPV based fair value calculation, I take the EPV calculated above and double it, assuming that the company, being in a growth phase, has the capability to earn double the current EPS in a steady state basis. So my fair value using the revised EPV method comes to Rs 338 (or double the EPV calculated above).
Using these revised intrinsic value methods, the fair value range for CSL’s stock is coming to Rs 193 to Rs 238. Assuming a margin of safety of 25% to the average of this range, the comfortable buying price for CSL’s stock comes to around Rs 162.
This is still 53% lower than the stock’s current price. So even on a best case basis, assuming a much brighter future for CSL that I did above, I won’t be a buyer in the stock at the current levels.
Another fact that suggests overvaluation is that CSL’s stock, which has traded within a P/E range of 5-10x over the past 10 years, is now trading at over 12x. While this does not suggest a huge overvaluation and seems largely due to the stock’s re-rating, but then the “E” always have the potential to give negative surprises especially when a company does not have a clear-cut moat and is on a capital expansion spree.
- One of the biggest concerns I have with CSL is the negative FCF and the continuous need to expand capacity to meet new demand. If this continues – and this is most likely to continue till the business gets even more profitable, which is highly unlikely – the company might have to resort to fund rising as its internal cash generation won’t be enough to fund expansion. Plus the company is trying to make a mark in the high-end sanitaryware segment, which may increase inventory levels as fashions change faster here. Inventories have already risen at an average annual rate of 35% over the past 5 years as compared to sales growth of 25%, which is a concern.
- The second risk is, of course, that of competition getting intensive. While the company’s management expects its market share to rise to 30- 32% in 3-5 years, this seems highly unlikely given that competition is not going to stand still. CSL already does not command a good mind share as compared to leading Indian brands like Hindware and Parryware. I got his validated from speaking to my father who has been in the sanitaryware business for the past 30 years, plus some other dealers around my place. Rising competition will lead to pressure on pricing and thus margins, which may further dent FCF.
- The unfortunate demise of founder’s son, who was leading CSL’s growth over the past few years, may act as a speed breaker for the company. The founder now needs to strengthen the core management team using outside (professional) help, which may bring another set of managerial problems (given the past experience of family owned businesses involving professionals).
- One key technical risk with CSL is the very low liquidity levels of the stock, which raises the impact cost for investors – cost of buying and selling in large quentities. This was seen recently when a transaction to buy just 105,000 shares sent the stock up by almost 15% in one day. The average daily liquidity over the past 52-weeks is just 5,000 shares, which is on the lower side and can add tremendous volatility to the stock’s price.
5. Financial & Market Snapshot
Data Source: Ace Equity, Safal Niveshak Research
Data Source: Ace Equity, Safal Niveshak Research
Data Source: Ace Equity, Safal Niveshak Research
6. “Should I Buy CSL?” Checklist 
Disclaimer: The author of this report, or any of his family members, does not own the stock(s) mentioned herein. The opinions in this report are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stock(s) mentioned or to solicit transactions or clients. The information in this report is believed to be accurate, but under no circumstances should a person act upon the information contained within. I do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.
Good one Vishal..:) Have been expecting research report on Cera and here it comes..:)
Hi Vishal,
Excellent post.
I came across your web-site just few days back and repent so much that, how come I missed it for these years.
That way, I am already in loss!
Thanks for doing this wonderful job of teaching retail investors about value investing.
PLEASE KEEP IT UP!
This kind of detailed post will entice anyone to ask for more.
So I have a request on detailed analysis on Va Tech Wabag, which is kind of oligopoly and tremendous growth potential. But what price can be justified for it?
Regards,
Vikas
Thanks Vikas! I’ve noted your request, but you must know that I already have a long pipeline of companies to ve covered under StockTalk so not sure when I would be able to cover VA Tech. Regards.
Hi,
Well researched and covered. Liked your risks section.
But why cover a company like Cera at all ? Redaing from what you have written it is no. 3, will keep needing huge cash, the fashion keeps changing etc etc.
Should we not put some kind of a filter on which stocks are worth spending time on.
Regards,
Sudhir, this was on “popular demand” as I had received several emails etc. for my view on the stock. 🙂
But yes, I am already working on my next StockTalk. 🙂
sure, you are the boss. all i am suggesting, rather requesting is lets have some criteria to put out research on companies. if the markets start moving the list of popular demand(s) will only keep getting louder.
Hi Vishal,
very much agree with the Sudhir. Another idea can be, You set few parameters to identify good business and let tribesmen come up with analysis of their individual choice of companies. Then you comment/rectify that analysis. This will reduce your effort and hence will cover more in Stock Talk.
And additionally, it will be kind of exercise for all of us.
Regards
Sunil
Nice Ones Vishal… My request is to analyse the companies which are the wealth destroyers..
Just read an article on KFA… Due to some accounting magic the loss is less in their books..
Kartik wealth creators or destroyers ?
sudhir… Destroyers…and how to identify the signs
Hi Vishal,
Thanks for covering Cera. Need to highlight a few points.
1) With growing disposable income there is an increasing trend to modernize and uplift the standard of living. Hence this caters to remodeling/renovation of housing and bathrooms. So here we are not only looking at the un-sanitized markets alone but also replacement/up gradation market.
2) A strong point for Cera in the last few years had been the increasing brand moat. If you see at the debtor turnover ratio (cash collection cycle) increased considerable from FY08 to Fy12 with increase every year to 7.97 times. This shows increase in brand CERA.
3) Another important trend is the falling D/E which has come down from 0.65 in Fy2008 end to 0.08 in Fy12 end decreasing every year. So in spite of huge growth company is successfully lowering their debts every year which may lead to a robust balance sheet and better dividends in the future.
4) RM for their business is very easily available with no severe margin pressure. This is a critical point and can prove sustainability and protection from price volatility for better profit growth in future.
However, being a family run business the biggest concern at this point is the demise of the young MD and future in terms of succession and vision. For existing investors it is a HOLD at best.
New investors should wait for some clarity to emerge on this front before considering positions. Price to enter comes much later.
Nice article Vishal….
Hi Vishal
I have been tracking Cera for some time now and have read plenty of views on it, most of them being biased (IMO). Finally I am reading a thorough and unbiased analysis on the Company 🙂
The business is a bit capital intensive as you have pointed out, with capital turnover ratio of 1.5. Also worth noting is their trading business (outsourcing) which doesn’t require much capital and if we deduct this outsourcing revenues, then the turnover ratio declines further.
I was interested in buying Cera at 230-240 levels, but the prices have never come to those levels since I have been tracking this Company 🙁
A detailed analysis, as usual…however, some points have come to my mind:
You have put a red mark against dividend history. But, the fact that the company has been reinvesting its earnings in the business and maintaining high ROE all this while, makes it alright even if the payout ratio is low..Also, company needs cash for capacity expansion, thus keeping these considerations in mind it seems all right that the dividend history is not that great..
Also, you have said that company has got a reasonable moat given that the average gross profit margin is around 39% over the past 5 years. While, this is really encouraging, but as you yourself mentioned that the company has not got much bargaining power with its buyers and suppliers and with its customers too, isn’t that make the case of a reasonable moat somewhat weaker?? Also the gross margin have been declining in the last two-three financial years. Additionally, there are very little entry barriers in the business. The brand power and products are not that great as compared to some of the competitors. And network effect is missing too..
Just some thoughts that come to my mind..but all in all a good analysis…
Hi Vishal,
Excellent post.
I came across your web-site just few days back and now i frequently come to your site for learning more and more as i also started your free course. and also it will very helpful to understand your stocktalk.
and very good initative of warren buffet letter and i also started to part in this process.
Thanks for doing this wonderful job of teaching retail investors about value investing.
PLEASE KEEP IT UP!
This kind of detailed post will entice anyone to ask for more.
So I have a request on detailed analysis on Wimplast, which is kind of home consumption tremendous growth potential. But what price can be justified for it?
Regards,
Excellent analysis of stock.What matter me is the approach to investment.Decsion making made simple.It all depend on how person come to conclusion.Very vital is how you make complicated thing simple.This what Warren Buffett told us all the way.Develope circle of competenece.This most imp thing in investment. If don’ understand don’ invest.
The company posted a handsome growth of 53% in the revenues to Rs 117 crore. The net profit also grew by 37% to Rs 11 crore. With this growth the company is well on course to achieve revenue target of Rs 500 crore in this fiscal. For the Half year ended September 2012, company posted 47% growth in the top line to Rs 213 crore and 39% jump in the bottom line to Rs 20 crore.
Hi, how did you calculate the average P/E for a year?.
Thank You for the wonderfully educating write-up. I am going to use the checklist and valuation techniques mentioned by you.
Warm Regards
Vinod
Dear Vishal,
Some times it will be very difficult to find words to applause people with the generosity level that you have!
I Just want to share my view on your request management style while I think you can publish your reports based on most popular(fundamentally)/most requested companies rather than in order that it has been requested.
so that we will not miss the gems when they are hidden.
Thanks
Shaggy Boo
Bangalore
INDIA
Hi Vishal,
From where do you get the data for average P/E for last 10 years. Can you please share the source.
Thanks!
Dear Sir,
Can you analyse Noida Toll Bridge. The Company has no capex requirement and its debt has come down and its receivables are in cash. The company can generate revenues from Ads.
Regards,
L.Balaji
Stock has jumped up 2 times since the analysis.
A lot of money has been lost by ValueInvestors by refusing to pay a bit extra for the stock than its worth. This is constructive criticism Vishal (just like my last criticism). Hope you take in the right spirit, and analyse, what factor you missed. I have a lot of respect for your body of work, but even Warren Buffet, still learns
We all have quirks in our brain, and it’s always good to keep learning. That’s exactly what I’m doing. So I respect your latest ‘criticism’. 🙂
BTW, your last ‘criticism’ was not well-founded because I do not “recommend” stocks on Safal Niveshak – as you had also mentioned on another forum.
But yes, I do make mistakes and am happy to share them ‘publicly’ 😉
Cera Sanitary has been a great find by Safal Niveshak. In the last few days of May 14, the scrip has gone up 20% on 2 days taking it to a record high. Safal post on Cera has benefited many by more than doubling the value within a year.
i used to invest in shares in 90s. Most of the paper is junk now and I have stopped calculating. One day, I found that I am getting dividend of Rs 625 of cera sanitaryware ltd for 100 shares of cera sanitaryware ltd.
I never bought this share. I have 100 shares or Madhusudan industries ltd. is this a offshoot of that share. I am making this guess because address is same in dividend warrant as that of Madhusudan industries ltd.
When was this allotted.
Please help, as my local broker is not aware of this development.
Hi Vishal,
Thanks for the detailed analysis on ‘Cera Sanitaryware’ . Following are my points.
1. The inventory went up by over 80% in 2012 compared to the previous year. What is the reason for this inventory build up.
2. Negative free cash flow is a cause for concern and in 2012 this was offset by taking some secured loans, selling current investments and burning some cash.
3. It will be very good if we follow the ’20-Point Checklist’ in the Stock Ideas forum. What do you think.
Regards,
Jana
Regards,
Jana