Sanitaryware stocks in demand; Cera soars over 60% in six days

Cera Sanitaryware, HSIL, Orient Bell and Kajaria Ceramic have gained between 3-20% on the NSE.

Shares of sanitaryware companies have rallied by up to 20% for the second consecutive day in a row on back of heavy volumes. Cera Sanitaryware, HSIL, Orient Bell and Kajaria Ceramic are up 3-20% on the NSE, in otherwise subdued market.

Cera Sanitaryware has soared 20% to Rs 1,380, which is also its record high on the NSE.  The counter has seen huge trading activity, with a combined 334,000 shares already changing hands till noon deals, as against an average sub-100,000 shares that were traded daily in the past two weeks on the NSE and BSE.

The stock has rallied 63% in the past six trading sessions from Rs 845 on April 23, after reporting a strong set of numbers for the fourth quarter ended March 31, 2014 (Q4FY14). The benchmark CNX Nifty has declined nearly 2% during the same period.

The company has reported 38% year-on-year (yoy) jump in net profit to Rs 19 crore for Q4, on the back of higher operational income. Its net sales surged by 38% yoy to Rs 218 crore.

On the operating front, the EBITDA grew by a whopping 69% yoy to Rs 35 crore and margins expanded by 297 basis points (bp) yoy to 16.1%. The growth in margins was mainly due to a decline in raw material costs as a percentage of sales by 271bp yoy.

Analyst at Angel Broking said, owing to changing lifestyles, sanitary products are now perceived as more than a basic necessity. Their role has widened to being status statements, thus commanding a higher allocation of the spending budgets of individuals. Increase in disposable incomes of people has been a vital factor supporting the demand for sanitaryware products.

Also, requirement of personal space and privacy are gaining inevitable place, subsequently leading to nuclear families. This has led to augmented residential figures, thereby increasing the demand for sanitary products. This trend is expected to continue providing sustainable demand visibility for sanitary products, he adds.

Among other individual stocks, HSIL and Orient Bell have rallied 10% each at Rs 187 and 59.15 respectively, while Kajaria Ceramics is up 3% at Rs 468 on the NSE.