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₹1 lakh jumps 100 times to ₹1.57 Cr after 1 bonus issue: Buy the stock?

With a market cap of Rs. 7,261.05 crore, Cera Sanitaryware Ltd. is a mid-cap company active in the consumer goods sector. The company is the top supplier of household products including whirlpools, sinks, mirrors, shower enclosures, shower panels, tiles and sanitary ware. Let’s see how the shares of Cera Sanitaryware, one of the multibagger stocks, have managed to get investors crorepati with bonus shares in years.

Cera Sanitaryware Share Price and Bonus Issuance History

Shares of Cera Sanitaryware Ltd closed today on the NSE on the NSE 5,560.00 each, up 4.19% from the previous close of 5,336.25. The share price has risen from 70.75 on November 2, 2007 to the current price level, which represents a multi-dredging yield and a record high of 7,758.66%. An investment of 1 lakh in the company in early November 2007 would have given you a shareholding of 1413 shares. The company has performed well to date and was not extremely profitable at the time, but taking into account its plans and financial strategy, the company had issued a 1:1 ratio bonus on September 2, 2010, resulting in a multiplication of the existing shares of the investor and doubled the number of shares they held.

The total number of shares held by the investors added 1,413 additional shares and resulted in the number of shares after bonus declaration coming to 2,826. The value of the shares at the time of the bonus issue was over 4 lakhs meaning immediately after the event your initial investment of 1 lakh quadrupled and became over 4 lakh. After that, the company continued its growth and accelerated the pace with its competitors from the year 2012, it had shaken hands with many large investors and also took care of the small investors.

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The total number of shares of 2826, at the current market price, is worth more than 1.57 crore, which is 100 times more than what the investors had invested. It suggests that smart stock-picking decision-making and patience can give you your hand on a greenish/profitable portfolio.

Q1FY23 Results of Cera Sanitaryware

On a stand-alone basis, the company reported income from operations of 395.75 in Q1 FY23 compared to 222.84 Cr registered in Q1FY22, representing 78% YoY growth. Total operating income increased 73% year-over-year from 228.59 Cr in the same quarter of the previous year to 395.48 in the quarter ended June. The company’s total expenses increased 65% year-over-year from: 203.01 in Q1FY22 to 334.59 Cr in Q1FY23. The company reported an EBITDA of 60.89 Cr in Q1FY23 compared to 25.58 Cr in Q1FY22, representing 138% YoY growth. The company reported a profit before tax (PBT) of 52.96 Cr in Q1FY23, which is a YoY growth of 207% of 17.25 Cr reported in Q1FY22 and the company’s net profit or profit after tax (PAT) grew 207% year-over-year from 12.91 Cr in Q1FY22 to 39.63 Cr in Q1FY23.

Should You Buy Cera Sanitaryware Shares?

Research analysts at brokerage firm Bonanza Portfolio Ltd said in a note today that “Due to strong demand and record usage, we expect the company to achieve strong revenue/EBITDA/PAT CAGR of 21%/21%/24% during FY22-25E with margins slightly up 50 bps YoY As we look ahead, we continue to see tremendous potential for their products, healthy demand, coupled with strong positioning in the industry, allowing them to gain traction and momentum going forward In addition, a balanced product portfolio at a varied price range, a robust distribution network and increasing brand awareness in Tier-II and Tier-III cities bode well for continued earnings growth.According to DCF, we arrived at a target price of 6,564/share currently trading at a 19% discount.”

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Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, not Mint.

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