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Earnings Call Analysis
Q1-2025 Analysis
Cera Sanitaryware Ltd
Cera Sanitaryware Limited faced a tough landscape in the first quarter of FY '25, primarily driven by sluggish demand, severe heat wave conditions, and the impact of general elections. Despite these challenges, the company reported revenues of INR 398 crores, down 6.8% from INR 427 crores in the same quarter the previous year. The profit after tax also saw a decline to INR 47 crores, a 16.1% decrease from INR 56 crores. This slowdown was particularly felt throughout all key market segments, with the Sanitaryware and Faucetware segments contributing 53% and 36% respectively to total revenues.
In response to market conditions, Cera Sanitaryware is strategically positioning itself to capture the growing demand for luxury bathroom fittings. In the recent quarter, new product development accounted for 32% of total sales as the consumer shift towards higher-end products becomes pronounced, especially in urban areas. The management remains optimistic about growth accelerating in the latter half of FY '25, anticipating that prior investments in product enhancements and marketing will yield positive results.
The company's EBITDA for Q1 FY '25 stood at INR 72 crores, reflecting a decline in profit margins from 19% to 17.5%. This margin contraction was attributed to decreased sales volumes and increased discounts provided to stimulate demand. Despite the challenging quarter, the management is sticking to its long-term guidance of achieving a revenue target of INR 2,900 crores by March 2027, with expectations of a 16% compound annual growth rate (CAGR) over the next three years.
Cera Sanitaryware remains committed to expanding its manufacturing capabilities, having increased the production capacity of its Faucetware facility from 300,000 to 400,000 pieces per month. The company is also pursuing greenfield expansions in its Sanitaryware facilities and expects to secure the necessary land by September 2024. A budget of INR 25.4 crores has been allocated for capital expenditures in FY '25, aimed at enhancing operational efficiency and supporting the luxury product range.
As of June 30, 2024, Cera retained cash and cash equivalents of INR 864 crores, reflecting a 14.4% year-over-year increase. The Board has approved a buyback of equity shares amounting to INR 130 crores at a price of INR 12,000 per share. This indicates a strong commitment to returning value to shareholders alongside a history of increasing dividend payouts.
The management is confident that improvements in demand conditions will commence in the second half of FY '25. Growth in the B2B project segment has already been noted, with the project bank increasing by 15% to 20%. Retail demand is anticipated to follow suit, reflecting broader industry recovery as economic conditions normalize. With ongoing strategies aimed at premium product offerings and supply chain diversification, Cera Sanitaryware is poised to strengthen its market presence in the coming quarters.
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Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Earnings Conference Call of Cera Sanitaryware Limited. [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Mr. Mayank Vaswani of CDR India. Thank you, and over to you, Mr. Vaswani.
Thank you, Michelle. Good morning, everyone, and thank you for joining us on the earnings conference call for Cera Sanitaryware Limited to discuss the Q1 FY '25 earnings, which were announced yesterday. We have with us today the management team comprising Mr. Vikas Kothari, CFO; and Mr. Deepak Chaudhary, Vice President, Finance and Investor Relations at Cera Sanitaryware. We will start with brief opening remarks from the management, following which we shall 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. Over to you, sir.
Thank you, Mayank. Good morning, everyone. On behalf of the management team of Cera Sanitaryware Limited, I would like to welcome you to our earnings conference call. I will begin by sharing some updates on the operations and strategy, following which our CFO, Mr. Vikas Kothari, will run you through the key financial highlights.
The first quarter of FY '25 continued to experience challenging market conditions driven by subdued demand across key markets, intense heat-wave conditions and the effects of general elections. Despite these headwinds, the company reported revenues of INR 398 crores and profit after tax of INR 47 crores for Q1 FY '25. Our Sanitaryware and Faucetware business segments contributed 53% and 36% of our total Q1 FY '25 revenues, respectively.
While our sales this quarter did not reflect significant growth, we remain committed to our long-term vision. To be noted that Q1 results do not impact our guidance since we have already taken into consideration the expected slow performance in Q1 and Q2 of the financial year. We are confident that growth will gain momentum from the later half of the year.
New Product development accounted for 32% of the total sales in this last quarter. Over the past 2 years, there has been a growing consumer shift towards luxury properties and high-value bathroom fittings, especially in the major cities. To capitalize on this trend, Cera has been undertaking strategic measures to enhance its offerings and capabilities. We are committed to strengthening our presence in the luxury segment over the next 5 years.
Although we are still in the early stages of substantial [indiscernible] progress, our focus remains on laying the groundwork for its long-term growth. Our upcoming product launches will continue to feature innovative designs and value-added features tailored to luxury seeking consumers.
As most of you are aware, Cera currently has 4 distinct brands: Cera, Luxe, Lustre and Senator. The introduction of new SKUs, the recession of existing lines and expanding into new product categories have significantly broadened our portfolio. While our flagship brand, Cera, continues to perform strongly in the key markets, Senator, Lustre and Luxe are poised to make notable numbers into the luxury segment.
Additionally, we are focusing on premiumization in Tier-2 and Tier-3 towns to meet the evolving demand of these markets. This balanced approach not only reinforces our commitment to serving a diverse customer base but also strengthens our market position and adaptability. By seizing opportunities across all market segments, we ensure our relevance and competitiveness while maintaining margins.
In Q1 FY '25, our imports from China totaled INR 7 crores, representing 2% of the sales. Cera remains committed to reducing reliance on Chinese product financing our in-house manufacturing capabilities and diversifying our supply chain sources. In the previous financial year, Cera successfully completed the expansion of its Faucetware facility, which increased our monthly production capacity from 3 lakh to 4 lakh pieces.
I'm pleased to report that the plant has remained efficient after the ramp-up period. With adequate inventory levels, we have optimized our production strategy to achieve an ideal balance between production and inventory, resulting in Faucetware capacity utilization of 84% in Q1 FY '25.
Regarding our upcoming greenfield Sanitaryware facilities, we have successfully acquired a major land parcel. Due diligence is ongoing to secure the remaining land, which is anticipated to be completed by September 2024. The strategic expansion in Sanitaryware and Faucetware underlying our commitment to broadening our premium and luxury product range, ensuring high quality and precision to advance manufacturing technology and stringent quality control.
Our budget for regular and routine CapEx for FY '24-'25 is INR 25.40 crores. encompassing essential upgrades in our Sanitaryware and Faucetware plants, including machinery replacement, customer touch-point enhancements and IT developments. These investments are aimed at ensuring operational efficiency with continuity and improved objectives.
Since launching the retailer loyalty program in FY '22-'23, we have enrolled about 20,000 retailers and accumulated more than 3 lakh invoices of the application. Of the total retail sales amounting to INR 217 crores, 37% are eligible for loyalty rewards. In FY '24, we achieved the highest ever advertising spend of INR 63.2 crores, representing 3.4% of sales. In Q1 FY '25, we have spent INR 11.5 crores as compared with INR 11 crores in Q1 of FY '24 towards publicity, which is in line with our projected spending for FY '25.
Our focus on effective cost management and operational efficiencies has enabled us to sustain our margins without implementing any substantial price increases. In Q1 FY '25, our Sanitaryware plant achieved a capacity utilization rate of 76%, projecting a balanced approach to production and inventory management. For the quarter, B2C sales comprised 64% of our total revenue. Looking ahead, we anticipate continued strong demand from both B2C consumers and the growing B2B project market. Strategically, we are leveraging project sales to manage inventory effectively.
Maintaining strong margins has always been a priority at Cera. While we recognize the growing significance of B2B project sales and are committed to integrating this channel into our business strategy, we remain selective about the projects that we are undertaking. I would like to reiterate that Cera is committed to a comprehensive set of strategic initiatives designed to drive growth and strengthen our market presence. We've initiated into expanding our production capacity, enhancing our capabilities for complex and high-value products and investing in new product development.
Our continued focus on advertising and marketing aims to boost brand visibility while emphasizing on premiumization and improving our network and distribution channels, which will enable us to capture higher market segments. Additionally, we are fortifying industry relationships through engagement with key influencers, such as architects and plumbers. Collectively, these efforts are intended to position Cera for sustained success and reinforce our competitive edge in the market.
In conclusion, while Q1 FY '25 continued to present some near-term challenges. Cera Sanitaryware remains resilient and focused on our strategic objective. We are confident that our comprehensive initiative will enable us to navigate these challenges effectively. As we move forward, we are optimistic about leveraging our strengths and addressing evolving market demand to continue delivering value to our stakeholders and maintaining our leadership in the sanitaryware and faucetware industry.
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 June 30, 2024. Thank you, and over to you, Mr. Vikas Kothari.
Thank you, Deepak. And a very good morning to everyone. I will now provide a brief overview of the company's financial performance for the quarter ended June 30, 2024.
In Q1 FY '25, revenue from operations stood at INR 398 crores as against INR 427 crores in Q1 FY '24, registering a decline of 6.8%. EBITDA in Q1 FY '25 stood at INR 72 crores as against INR 84 crores through Q1 FY '24. EBITDA margins for the current quarter stood at 17.5% as against 19% in Q1 FY '24, registering a decrease of 150 basis points. The sad decline in EBITDA margins is due to lower fixed cost absorption caused by decreased sales and higher discounts offered to address the challenging market conditions.
For the quarter under review, 53% of revenue came from Sanitaryware, 36% from Faucetware and 9% from Tiles, and Wellness contributed 2%. On a Y-o-Y basis, Sanitaryware revenue decreased by 9%. Faucetware revenue decreased by 5%, Tiles by 20%, and the Wellness improved by 16%. The Sanitaryware and Faucetware segment remain the cornerstone of our business, contributing 89% of total revenue. In Q1 FY '25, 44% of our sales were in premium categories, 32% in mid-categories and 24% in entry-level category.
Profit after tax was INR 47 crores in Q1 FY '25 as compared to INR 56 crores in Q1 FY '24, registering a decrease of 16.1%. EPS for the quarter stood at INR 36.11 compared to INR 43.35 in Q1 FY '24. In terms of the working capital, inventory days increased from 74 days to 75 days. Receivables days remained stable at 28 days and payable days stretched from 30 to 37 days. Consequently, the net working capital days were reduced from 72 days to 66 days in Q1 FY '25.
As on June 30, 2024, our cash and cash equivalents stood at INR 864 crores, marking an increase of INR 109 crores or 14.4% compared to the corresponding previous quarter. Regarding sales distribution, Tier-1 cities accounted for 35% of total sales, Tier-2 cities for 22% and Tier-3 cities led with 43% of total sales.
In addition, I am pleased to announce that the Board of Directors had its meeting held on August 5 has approved buyback of its fully paid equity shares through tender route at a price of INR 12,000 per equity share for an aggregate amount not exceeding INR 130 crores, excluding any expense incurred or to be incurred for the buyback.
In conclusion, I want to reemphasize our commitment to maintaining strong financial discipline, leveraging our inherent strength and solidifying our leading position in the sector. With this, I would now request the moderator to open the line for Q&A. Thank you so much.
[Operator Instructions] The first question is from the line of Praveen Sahay from PL India.
Sir, related to the bifurcation which you have given among the Tier-1, Tier-2, Tier-3 as well as for entry and the premium level, so if I look at your Tier-1 sales has actually increased on a Y-o-Y basis, and Tier-3 and Tier-2 has been down. So you had seen in the Tier-2, Tier-3 is the more competitiveness or demand slowdown in the period as compared of Tier-1?
Yes, Praveen, thank you for asking the question. So my understanding is, as far as the tier bifurcations are concerned and if you compare with the previous comparisons also, so more or less, there is a demand slowness in all the tiers. However, if you see in terms of the breakup, for the Tier-1, it was 35% versus the previous corresponding quarter, 33%. Tier-2, it was 22% and the previous corresponding quarter, it was 22%. And in Tier-3, the percentage is 43% against the previous quarter corresponding 45%. So as such, if you see in terms of the impact of the slowness of demand is concerned, it has impacted all regions, all cities and tiers and including the market segments.
Okay, okay. So just on your contribution has changed. How is that all the -- everywhere you're seeing the impact in the quality?
That is correct, what I would suggest we should read too much into 1% or 2% up and down between the tiers, sorry between quarter-on-quarter. Because these changes will keep on timing between one quarter to the next. So more or less, the idea is that it is not that one of these sectors are experiencing slowdown because the other tiers are expecting [indiscernible] lower than the others kind of a slowdown. We are seeing -- our sense is that all the 3 tiers are having a kind of slowdown. And we anticipate that this should improve from the second half of the year.
Okay. Second question is related to the gas. How is in the gas pricing as an average, or if you can give the GAIL and the Sabarmati numbers as well.
Yes. Regarding the gas cost, so as we had seen in the period there also, the gas has largely benefited in terms of the overall price. So gas prices have been favorable during this quarter also. The average gas price from GAIL was INR 28.38 per cubic meter as against INR 29.31 in Q1 FY '24. Similarly, the average gas price from SGL was INR 51.40 per cubic meter as against 50.01 per cubic meter in -- increase drawl of gas from GAIL reaching out to roughly 86% in Q1 FY '25, which was 78%.
[Technical Difficulty]
Hello?
Sorry for the line for the management has been disconnected. Please stay connected while I try to reconnect them. Ladies and gentlemen, thank you for patiently holding the line for the management has been reconnected. Over to you, sir.
Yes. Sorry there was some disruption. So I was briefing about the gas cost. So the sale was positive in the Q1, and the overall weighted average gas cost in Q1 was at INR 31.64 as against INR 30.91 in Q1 FY '24, which is significantly lower as compared to the industry standards.
Okay, okay. And the last question, sir, related to the margin profile. So for this quarter, we had seen a correction in the margin. And can you give some guidance for the rest of the year? Because your guidance of EBITDA margin of 16% plus and 29 billion, [ by '27 ] as you had said you are sticking to that? So next 9 months, where you are seeing this margin profile to be?
Yes. Thank you, Praveen. So as far as margins are concerned, as I have already briefed that the margins were impacted because of the activity impact. But this, we see it as a very short term. Our understanding, that we are quite confident in terms of the margins which we will keep impact between 16% to 17%. And I would say, it will further improve as the demand situation will improve. So it is just the one quarter where we have seen or where largely all the major industry players including Cera have seen the slowness on account of different factors. So that has somewhat impacted the margins. But for the rest of the year, we are quite confident that the margins will be maintained between 16% to 17%.
[Operator Instructions] We'll take the next question from the line of Rishi Kothari from Pi Square Investments.
I have some couple of questions. First is, in the initial stage, you said that right now, we are -- so the quarter 1 FY '25 was not able to -- it was a not good quarter for the company, but we are maintaining our targets for the coming future. So do we have any set number that we have given, that this target have been met in 2, 3 years down the line for top line or bottom line sort of way?
Thank you. So regarding the guidance, what we have given earlier, the guidance given earlier was of reaching the target of INR 2,900 by March '27, which will remain intact. This target actually we have set after factoring for the expected slow performance in Q1 and Q2 of the current financial year. And we anticipate that the improvement in the demand condition will start from the second half of the year. So as far as the guidance which we have given of maintaining a 16% CAGR over a period of 3 years is intact.
Okay. And so in terms of the actual outcome in the market, I just see that the listed market is entering a booming that people are buying homes and all sorts of things. And Cera Sanitaryware is something that comes second to the value chain of real estate market.
But still, there is some mutated demand, if you see the FY '23 to '24 [indiscernible]. The real top line has not increased that much. So what's the main problem that we are facing? Is that people are actually going more towards other brands normalized sector is emerging? Or what something are we facing right now?
Now see, the industry by itself has not been doing too great since quarter 3 of the last year. So there's not that Cera Sanitaryware has not been performing well. It is the industry as such because it's facing kind of demand challenges since Q3. And Q1 was particularly impacted because of elections and the intense heat wave conditions, which was prevailing in the country.
As Mr. Vikas mentioned earlier, like we anticipate that from Q3 onwards, the demand situation should improve. And essentially, what we want to stress is, this is not something that is impacting our company only. It is continuously impacting the market as a whole.
So do we have any percentage, what is the [ alternate ] sector does, should segment are in terms of [indiscernible]?
Sorry, your question was not audible. Can you repeat again?
So what's the organized sector for just sanitaryware and faucetware industry for entering our market?
You're asking whether the organized sector has grown in the last quarters or something is that right? I didn't get your question still.
No. What is the percentage of organized sector that we as a sanitaryware industry as well faucetware industry.
You're talking about the size of the organized and the unorganized sector?
Yes, yes.
Now the figures are not readily available. But what we assume is that the sanitaryware industry size would be in the region of INR 5,000 crores, and the faucetware would be something like INR 8,000 crores. If you're talking about organized. INR 5,000 crores for sanitaryware and INR 8,000 crores for faucet. And the unorganized for the sanitaryware will be something like INR 4,000 crores and Faucetware will be INR 6,000 crores. So total will be Sanitaryware INR 9,000 crores and Faucetware INR 14,000 crores.
And how do -- we have seen the change in shift from organized to unorganized? Do we see any increase in terms of the growth targets or do we see any sort of improvement eventually from unorganized to organized?
There has been some shift from the unorganized to the organized. Post-coming of GST, there was an anticipation that there would be movement of market from the -- market share from the unorganized to organized, which has happened also. Again, broad numbers, if you want specific numbers, these are not available. But going forward also, you'll find that the shift from the unorganized to the organized is a kind of, you can say, slow process. Because most of the unorganized sector is concentrated in the [ more retail ]. And in time that as of now, they are taking a lot of challenges in quite a few respects.
One, in respect of the kind of raw material increases which have happened in the [ past years ]. The gas prices has increased significantly in the last 3, 4 months and also because of the fact that the position would have started becoming more and more strict in respect of the kind of emissions and tons, which have been discharged. So this is a continuous focus, and we find that our free market growths to capture more of the organized players as opposed to the unorganized players. But this is a process.
We'll take the next question from the line of Udit Gajiwala from Yes Securities.
Sir, firstly, when you specify that you are expecting demand to improve from H2, so I mean, is that a hope or it is backed by some orders or some inquiries that you're already getting? And if so, then from which segment?
So if I understand your question well, in terms of the guidance that we have given, is it backed by numbers or not? That is what is your question.
Yes, largely when you're expecting demand to improve from H2 and you also stated that softness will continue in Q2. So like what gives you the confidence basically that demand will improve from H2 because there is already a low base of last H2 since you stated that since last Q3, our demand has been weak. So I mean, just what gives you the confidence that demand will improve from H2?
See, there are 2 segments in which we operate. One will be the B2C and other will be the B2B. B2B segment has already started seeing improvements. If you look at our project bank side vis-a-vis December and if I look at compared December with June, December '23 with June '24. You'll find that there will be an increase of something like 15% to 20% on our project bank side, which is indicating that the project business has started picking up.
Retail has been being going slow for compound Q3, and Q1 was kind of anticipated also because of the fact that general elections was there. So project is kind of already picked up, and we are anticipating that the project will be going on to the retail side as well. So Q3, we are anticipating from the floor that we have already received on the project bank, so that should be reflective on the retail figures.
That is helpful, sir. Got it. And sir, in terms of the product mix change, the premium segment that constituted around 44%, what was the number in March Q1? And is there any target for this year or coming, say, by the time you want to achieve INR 2,900 crore top line. How much should premium be as a product portfolio?
So just giving you the numbers in terms of the categories between premium with an entry. So premium, it is 44% in Q1 FY '25. And in Q1 FY '24, it was 45%. Mid it was 32%, in the previous quarter, it was 31%. And entry, it is 34% in Q1 FY '25 as against 22% in Q1 FY '24. So more or less it is in terms of the categorization between entry, mid and premium, more or less, there is no major change. However, in terms of the efforts what we are putting in terms of the new category, what is -- what we are under the three brands that have been out that is the Luxe, Senator and Lustre series, which is going to showcase our luxury segment. So that is at a very initial implementation phase. And in terms of putting the more product parcels or enriching the product profile, our team is working on that. and we will definitely see in the coming years on this particular category also to be growing.
There is another thing I like to mention over here, that our company, our entire range, whether it is entry, mid or the premium, enjoy a very healthy margin profile. Normally, the expectation would be that the entry level should be having lower margins whereas the premium will be having very high margins. Especially in case of Sanitaryware, across the 3, so the entry, mid and premium, the margins are equally good.
In imported, there was a slight differentiation between the margins of entry and the premiums. But otherwise, when we grow and grow in volume, whether it is mid, entry or premium, the margins would be impacted in a positive manner, irrespective of where the growth is coming from. But as price is always to move more towards the premium segment.
The next question is from the line of [indiscernible] Omkar from [ SI ] Investments.
Am I audible, sir?
Yes.
My question was basically regarding the loyalty programs, which you have done. Can you quantify the benefits which you have derived so far from that? And what kind of benefits to expect from those loyalty programs?
The loyalty program, the main aim of the loyalty program is -- as of now, if you look at our distribution model, it is centered mostly towards 2 dealers. As resell to the dealers and the dealers are coming to the retailers or sub dealers. Now we kind of pass on benefits to the dealers, which they pass on to the retailers. The idea of the loyalty program is to pass on the benefits which we pass on to the dealers to be on -- to be further passed on to the retailers to go to the retailers.
So what this loyalty program has done is that we have been able to gather database in respect of what kind of retailer profile we have, what kind of buying that they are able to do. Because whenever they are uploading their invoicing we get a sense about what kind of product preferences are there. And also, we are able to pass on the benefits directly to the retailer, which earlier we were dependent upon the dealer.
So depending upon how we want to create our sales, how we want to create and push our products, we can design our loyalty program accordingly. So the main benefit which is there at instead of relying on the dealer, now we are able to go directly to the retailer through our own programs.
Is there only just to collect the database or any monitoring the effect to the company in the long term?
The monitoring process is also there. And it is enabling us to push the products that we really want to run it, gather information and gather data that what products are really being demanded by the consumers. And secondly, when we want to push something the benefits kind of rewards, which were earlier being pushed to the dealers and going there to the retailers.
So that is kind of -- we have a direct subsidy program for the government. So we don't have an need in the person who was there as middle man in between has been bypassed, and we're going in directly to the retailer and pushing products which we really want to promote.
So the second question was on the cash position. You mentioned you have around INR 864 crores of cash. This is excluding the INR 130 crores buyback or including the buyback? And the question regarding that is actually after doing the buyback, you will be continuing with the higher dividend payouts, which you have been doing for the last 2-odd years? Or how it will work out?
Okay. So regarding the cash reserves, so just to give you the cash reserve position, as on June 30, 2024 is INR 684 crores, which is including the buyback part what we have recently announced. And if you see in terms of the options where we have the distribution of excess cash, so dividends, definitely, if you see, we have increased the dividend significantly in the past 2 years from around INR 26 crores in 2021-'22 to INR 65 crores in 2022-'23.
Continuing the sale, the company has declared dividend of INR 60 -- dividend of INR 60 per share. which is amounting to INR 78 crores in financial year '23-'24. So this is -- this chain will continue in terms of paying out healthy dividends as part of maximizing the benefits or returns to the shareholders. And at the same time, the buyback is also announced. So that is another part. And in terms of the results which are there, there are some CapEx options which will come. So that can be taken care of.
Just a small correction, the cash reserves was INR 864 crores. It was including -- this was before buybacks.
Okay. So INR 130 crores will be less than that, INR 864 crores.
That is correct.
The next question is from the line of Aasim from DAM Capital.
So 2 questions. First, on the Sanitaryware plant...
I'm sorry to interrupt. Aasim, can you use your handset, please. Your audio is not audible.
Hello? Is this better?
Much better, please.
Yes. The first question was on the Sanitaryware plant CapEx. So 85% has already been acquired the land bank. 15%, which was supposed to be done by June, now that is expected to be done by September. Any change in the time line by the time the plant is actually commissioned? It was supposed to come by FY '26 and earlier.
So what we had said was that it will take 18 months from the date of commission -- starting of the commissioning of the plant, it will take 18 months on a zero date. It has not yet started. As you rightly pointed out, the earlier timing was that we should be completing the balance parcel by June. What is happening is land -- remaining portion of the land which is there consists of extremely small parcel. The acquisition of that land is taking some time. So we anticipate that it should be completed by September, October kind of a time.
But no civil work or anything has started on the balance land that you already acquired, is there?
No, no. Civil work has already been started. That decision to start the civil work would also depend upon the kind of demand situation which we are seeing right now. Once we see an uptick in the demand, we will be starting with the civil work. And the civil work, if possible to start even on the portion of the land which has already been applied.
But still, while the latest that the plant would be commissioned appears to the October 2026, 24 months from October of this year. We do the land -- basically acquire the balance land, right?
Correct. If you're trying to say that how we'll be able to move the demand situation in the [indiscernible]. While the way that we are progressing and how we are seeing this, that we are already in a very good kind of inventory position. We have very good outsourcing arrangements and also the kind of mix that having within our plans right now, it is possible to shift the mix and increase production of more premium products, once we see an upsurge in the demand. So we don't see any challenge in terms of the interim situation and the plant is under construction. So as of now, we are waiting for the demand to improve slowly for that we can start with the commission of the plant.
Sure, got that. I think you've made that -- you guys have made that pretty clear earlier also. So I just was curious about when the new plant starts in. And second, to an earlier question, you just spoke about project sales have picked up. You also mentioned project bank that has gone up from 15% to 20%. I just want to understand what exactly do you mean by this project bank? How do you define it?
See, what happens is when we are receiving an order for a project, that we will receive, you can say 3 to 4 months to somebody who is requiring immediately -- immediate delivery. So once we are receiving an order, the delivery period extends up to 1 year, like an order which has been accepted today, some parts of the order will be delivered today and balance will be delivered after some time.
And it keeps on happening because the requirements of the project also keep on coming up in phases.
So mostly when you're talking about the project bank, it means that orders which have been received that which are to be executed. And normally, the price validity and the acceptance, which we do remain valid for a period of 1 year.
Okay. So just another term for order book?
Correct, correct.
We'll take the next question from the line of Akash from UTI Mutual Fund.
Yes. Am I audible?
Yes.
Sir, just wanted to check what is the capacity utilization in Faucetware plant? I missed that.
So regarding the capacity utilization, the Faucetware plant is operating at 84% of capacity in Q1 and in this quarter, and the Sanitaryware is at 76% in this current quarter. And this particular capacity -- lowering down the capacity is to have a balancing impact in terms of the inventory what we are having and to see is how we can speed up once the demand improves.
Yes. Yes, sir. And sir, I mean, you would -- I mean, when you say that we would be trying to achieve INR 2,900 crores revenue by FY '27, if you can roughly share how would the, let's say, growth target look like in FY '25? Or if not '25, what would be the growth target in FY '26, if you can share?
So regarding the guidance what we have given of the 16% CAGR over a period of 3 years, so like I told, we have already taken into consideration the performance -- the first half performance of the FY '25, which is going to be slow or muted. And on [ PPP ], for the full year basis, that is '24-'25 as the full year, growth is projected to be in single digits. And the expected compounded CAGR, 16%. It is going to be achieved by the increased run rate when you see that the demand is going to be improved in the next 2 years.
Okay. So basically, we are broadly expecting healthy growth in FY '26 and '27.
Correct.
Sure. Sir, and just one last thing. I mean, you said that project bank has increased. So roughly over let's over next 9 months or, let's say, by FY '26, do you see the revenue mix changing in favor of project segment? Or you still believe at least 65% to 70% of the overall revenue would come from retail segment?
As of now, the total project to retail ratio, 64:36. It was earlier something like 65:35. So there has been a slight change towards the projects. So that would totally depend upon how the retail market is picking up because once the retail market picks up, we find that it will start going back to the level which was there earlier. If there is like stretching the pickup of the retail market, then maybe the certain percentage might go up slightly again, a couple of percentage points. As this retail picks up, we go back to the same level which was earlier.
Right. So even if, let's say, project segment goes to 60% of the -- sorry, project segment comes to roughly 40% of the overall revenue, still we are fine with that?
Correct, correct. Because if you see a differential, like the kind of margins that we have in retail segment vis-a-vis that we earn in the project segment, the discounts would be higher in the project segment by you can say 5% to 6%. So if you are talking about the kind of 5% movement from retail to projects, the 5% -- and the 5% will be kind of 0.25% impact on an overall margin, which we don't anticipate too much of a challenge as such. So even if it goes up to 60-40, it will take some time for the retail to pick up, we'll be fine with that. It will not impact the margins by too much.
The next question is from the line of Raj Shah from Marcellus Investment Managers.
Am I audible?
Yes.
So my question was regarding F '24 annual numbers. So there is a significant reduction in power and fuel costs. So as a percentage of sales it is reduced to 1.9%, which used to be 3% to 4% so in last decade. Because in spite of the fact that our purchases from -- in purchase of finished goods was -- has also reduced. So the question was what led to this significant reduction and what we can expect in FY '25?
I think you'll have to repeat the question. You're saying that the power cost has reduced by 1.9%?
Reduced to 1.9% of sales, which used to be 3% to 4% of sales.
It has reduced to 1.9% of sales as opposed to...
3% to 4% of sales, which is largely [indiscernible] average.
You are asking why there has been a reduction in the power and fuel cost?
Yes, sir. Yes, sir.
This is largely led by the increase in the consumption which we have been able to do from GAIL like we have 2 sources for gas. One is GAIL and another is Sabarmati. GAIL is subsidized. Earlier the drawls from GAIL was much lower, so that the weighted average seems to be higher. Now with the team [indiscernible] the condition, we are able to draw 84% of our gas from the lower subsidized portion. So that is why the gas cost in the overall business has improved.
Also, we have the [indiscernible] wherein this kind of compensates for the electricity costs which have been incurred by Cera. In the last year, a couple of [indiscernible] were under repair. So we were not able to draw from there. So once [indiscernible] to the current year, all those has been resumed from the [indiscernible]. So those 3 factors combined, like increased drawl from solar power, sorry, from the main lines and the increased drawl from GAIL have led to a reduction in the [indiscernible] gas cost.
Okay. So moving forward, what we can expect as a percentage of sales, what should be power and fuel?
As a percentage of sale, if you see, it is 1.3%, 1.4%. .
So it will remain at this level.
Yes.
We'll take the next question from the line of Prem Chaudhary from [ Pink ] Wealth.
Yes. So I have 2 questions. First, the margin difference between premium entry and mid level. And second, our order book -- current order book from project banks -- from project business.
See, as I told earlier in the margins for the [indiscernible] premium, entry and mid are more or less the same. It is slightly higher for the premium one. But more or less we see there is definitely across various area or across various ranges, but in Sanitaryware even the entry level we got good margins comparable with the premium level, premium margins. In Faucetware, there will be a slight difference. The entry won't be in such high margin as compared to the premium ones.
With respect of the order book, cannot give you the numbers as such. But as I said earlier, we -- as compared to December, the total order book has gone up by 15% to 20% for projects.
Okay. And the execution period for this?
Sorry?
Execution period for the project bank?
It is normally like, it keeps on happening, but it's a continuous process. So order banks keep on getting executed and new orders keep on coming in. The validity of an order for the price that we quote is valid for 1 year.
Thank you. Ladies and gentlemen, we will take that as a last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you, everyone, for attending this call. Thanks 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 time to join the call. Thanks a lot, and bye.
Thank you, members of the management. On behalf of Cera Sanitaryware Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.