Cera Sanitaryware Limited (NSE:CERA) Q4 FY23 Earnings Concall dated May. 11, 2023.
Corporate Participants:
Mayank Vaswani — Investor Relations
Ayush Bagla — Executive Director
Vikas Kothari — Chief Financial Officer
Analysts:
Praveen Sahay — Prabhudas Lilladher — Analyst
Vijay Kedia — Kedia Securities — Analyst
Akshay Chheda — Canara Robeco Mutual Fund — Analyst
Mihir Damania — Ambit Asset Management — Analyst
Rana — Equirus Securities — Analyst
Dhananjay — ASK Investments — Analyst
Udit Gajiwala — YES Securities — Analyst
Shrenik Jain — LIC Asset Management — Analyst
Sonali Salgaonkar — Jefferies — Analyst
Aakash — UTI Mutual Fund — Analyst
Omkar — Shree Investments — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q4 FY 2023 Earnings Conference Call of Cera Sanitaryware Limited. [Operator Instructions]
I now hand the conference over to Mr. Mayank Vaswani from CDR India. Thank you and over to you sir.
Mayank Vaswani — Investor Relations
Thank you, Mira. Good morning, everyone and thank you for joining us on the earnings conference call of Cera Sanitaryware Limited to cover the Q4 and FY 2023 Earnings, which were announced yesterday. We have with us on the call today the management team comprising Mr. Ayush Bagla, Executive Director and Mr. Vikas Kothari, CFO of 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 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 Mr. Ayush Bagla for his opening remarks.
Ayush Bagla — Executive Director
Good morning, everyone. The earnings for the quarter ended 31st March, 2023 was adopted by the Board of Directors yesterday, 10th May, 2023. The earnings documents have been released to the stock exchanges. During the quarter gone by, we continue to witness strong demand for our products as the overall replacement demand remains positive with consumer continuing to spend on more upgradation and improvement. Cera’s product and design emphasis allows us to focus on the B2C segment where it can truly exhibit pricing power. Over the last two2 years, all efforts have gone through to decouple Cera’s revenue growth from fluctuations in interest rates and housing demand, thereby insulating it from cyclicality. We have reported strong topline growth. Financial year 2023 revenues are higher by 24.6% on a — basis, and Cera revenue growth has been 3x of the industry growth rate. More importantly, our focus on enhancing the quality of revenues is reaping dividends. The topline increase is driven by a higher share of premium and high-margin products. Share of premium products in the incremental turnover is higher than the blended topline. This has aided in further expansion of margin. The gross margin increased from 52.77% in FY 2022 to 54.25% in FY 2023, and the EBITDA margin has increased from 16.66% in FY 2022 to 17.59% in FY 2023. Our stated objective was to increase our annual EBITDA margin by 50 to 75 basis points each year.
We have surpassed our stated objective as the increase in EBITDA margin in financial year 2023 has been almost 100 basis points, despite advertising spend in the year increasing from INR32 crores in FY 2022 to INR57 crores in FY 2023. The industry has traditionally followed an orientation of price increase as a regular response to overcome cost pressure. At Cera, we have responded differently. With the objective to deploy multiple levers to protect and enhance our margins, these include productivity and yield increases in the manufacturing processes, cost optimization, product mix enhancement through higher share of new, and higher value-added products, thereby limiting our reliance on pricing increases. As a result, we are well-placed to capitalize on market share gains made over the last two years. At present our manufacturing facilities continues to function at high utilization levels. During the quarter, the sanitaryware plant capacity utilization was 115%. In faucetware, the capacity utilization was at 118% during Q4 FY 2023. The faucetware expansion program to take capacity to 4 lakh pieces per month commenced from July 2022. The enhanced production is scheduled to go on stream in July 2023 and in a staggered manner, we increased monthly production to 4 lakh pieces per month by March 2024. We expect to complete the project in time and well within the cost of INR69 crores.
The product mix plant is colored SKUs, quarter turn SKUs, PBT SKUs and a few more SKUs that can be taken in from outsourcing partners. During FY ’22, China imports were INR69 crores or 5% of sales. In FY ’23, China imports were INR55 crores or 3% of sales. Cera was already one of the lowest users of products made in China and with availability of manufacturing infrastructure in-house, the percentage of Chinese imports to sales has been continuously declining in a business which is brand-driven, the fulcrum of success is manufacturing, quality and plant efficiency. With regard to capacity expansion, for manufacturing of sanitaryware, a fully aggregated land parcel in Gujarat, historically owned by a single owner has been shortlisted and the company is currently undertaking due diligence. We expect title documents to be executed in other approvals over the next six months. During Q4 FY ’23, no price hikes were undertaken. Our peer group companies increased prices in October and November 2022 while Cera did not. During 2021 and 2022, many price hikes were taken, which were all a demonstration of pricing power. Currently, we are capitalizing on the market share gain over the last two years. In sanitaryware raw material like China Clay, Feldspar, POP and the glazing recipe did not have a material price movement.
Zinc went down by 13%.In faucetware, brass prices increased by 5% in Q4 and 10% during financial year 2016. Despite changes in input costs, our increasing plant efficiency ensured stable gross margins in Q4 FY ’23 of 53.6% and in Q4 FY ’22 of 53.7%. For the 12 months, gross margin has increased from 52.77% to 54.25%. There is no increase in product prices. Due to availability of gas from isolated wells near our plant, the pricing of gas from GAIL continues to remain below market and will remain so in the future. Price has remained almost stable at around INR35 per cubic meter in December 2022, and in March 2023 it was INR36 per cubic meter. Normally, GAIL supplies 50% of Cera’s gas needs. However, in Q4 FY 2023, GAIL provided 65% of the gas requirement of the sanitaryware business. Sabarmati, gases pricing went down from INR67 per cubic meter in December ’22 to 58 per cubic meter in March 23, supplying 35% of the gas needs of the plant for Q4. Post April ’23, a price reduction has been carried out by GAIL from INR36 to INR31 per cubic meter and by Sabarmati from INR58 to INR41 per cubic meter. The Q4 weighted average cost of gas is INR43, much lower than industry. Gas costs constitute 2.68% of Cera’s top line. The retailer loyalty program that was launched by Cera in Q1 FY ’23, which has now almost completed 12 months. More than 14,000 retailers have uploaded 1.46 lakhs invoices.
The feedback received from retailers has helped us in understanding the consumers’ changing demands, geographical segmentation of SKUs and evolution of the reverse program to retailers. Besides standardizing invoices of the total retail sales of INR1,042 crores in FY ’23, more than INR339 crores of sales, which is 33% of overall retail sales in sanitaryware and faucetware have become eligible to receive rewards through this program. The company’s ability to tweak trade practices, trade pricing and ability to steer the direction of the dealer and retailer equation have all undergone a sea change. We have also seen an improvement in multi-brand retailers who have undertaken various initiatives to sell Cera products. After the success of the detailer loyalty program, a similar program was launched for plumbers across India. Cera had been conducting training workshops for many years now in passing installation and product knowledge to plumbers, a new program where the boards are provided to plumbers who recommend and facilitate the sale of Cera products is now active from 1st May 2023. The program communications include program posters at retailers and a mix of communication channels, which includes SMS, phone calls, creatives and in-person meetings by the sales and marketing team. In Q4 FY ’22, 104 new products were introduced. New products launched in the past three years constituted 34% of Cera’s top line in Q4.
Our highest ever advertising spends were achieved in financial year ’23 of INR57 crores. Cera share of voice was lower than its share of market, and now it’s increase in advertising spend, its share of voice is getting closer to its share of market. Publicity spend, which were INR7 crores in Q4 FY ’22 were increased to INR24 crores in Q4 FY ’20 despite a 340% increase in quarterly advertising and publicity expenses, there was no major impact on EBITDA and PAT margins. Population centers of 17 lakhs and above, which are Tier-1 cities have 31% of sales, population centers of three lakhs to 17 lakhs, which are Tier-2 cities have 22% of sales, and population centers below three lakhs of population are Tier-3 cities with 47% of sales. We can now go over the financials. Revenues from operations in Q4 FY ’23 was INR530 crores versus INR439 crores in Q4 FY ’22, an increase of 21%. EBITDA, excluding other income was INR85 crores in Q4 FY ’23 versus INR82 crores in Q4 FY ’22, an increase of 3%. The gross margin has remained almost stable. It is currently at 53.26% in Q4 FY ’23 against 53.47% in Q4 FY ’22. PAT was at INR63 crores in Q4 FY ’23 versus INR52 crores in Q4 FY ’22, an increase of 21% Y-o-Y. EPS for Q4 FY ’23 was 48.39% versus 40.04% in Q4 FY ’22. For Q4 FY ’23, 53% of the top line was from sanitaryware, 35% from faucetware, tiles represented 11% and wellness 1%.
On a Y-o-Y basis, sanitaryware revenues registered an increase of 18%; faucetware revenues increased by 29%, tiles increased by 14%, and wellness increased by 15%. The sanitaryware and faucetware verticals remained the bedrock of the business with the contribution of 88% to Cera’s overall revenues. The classification of overall sales in Q4 FY ’23 was 43% in the premium category, 31% in the mid-category and 26% in the entry category. Inventory days in Q4 FY ’23 was 77 days compared to 73 days in Q2 of FY ’22. Receivable days in Q4 FY ’23 was 32 days versus 35 days, payable days in Q4 FY ’23 were 40 days against 49 days in Q4 of FY ’22. Therefore, net working capital days in Q4 FY ’23 was 69 days versus 59 days in Q4 of FY ’22. This number is around the optimum number of inventory days that Cera has been making efforts to achieve for many quarters now. In this quarter, availability of products ensure there was no element of lost sales. This is the eighth straight quarter with no element of lost sales. In the current year, the capex budget other than the brown feed faucetware expansion and the proposed increase sanitaryware expansion program is at INR25 crores, of which INR20 crores was spent in the last 12 months and INR17 crore was spent in Q4. As on 31st March 2023, our cash and cash equivalents stood INR687 crores against INR580 crores in March 2022, an increase of INR107 crores or 18%.Positive cash flow for Q4 financial year ’23 had 62 crores as compared to INR54 crores Y-o-Y.
Positive cash flow for financial year ’23 has been INR219 crores versus INR164 crores in FY ’22, an increase of 34%. Internal accruals are being used to fund the two capex programs and we would also retain the flexibility to use some part of the cash and cash equivalents is required. No debt raising or equity dilution is planned or required for border capacity expansions. The Board of Directors yesterday have recommended a dividend of INR50 per share, which is 1,000% of the face value per share. In conclusion, I would like to say that due to the combination of internal factors, production throughput mathematician, brand scale and design differentiation as well as the macros of home improvement, Cera would be able to monetize all the growth drivers that present in. Cera’s growth plan remains intact as it plans to expand the capacity and to monetize rising demand. After taking a few years to break that INR1,250 crores to INR1,350 crores top line band in FY ’22, Cera touched the top line of INR1,446 crores. In FY ’23, Cera has reached a top line of INR1796 crores, a growth of 24.5% of our FY ’22 and a growth of 49.4% over FY ’21. This trajectory is three times the industry growth. It increases Cera market share and pricing power. Achieving the magic number of INR1,796 crores has reaffirmed our confidence of achieving the targeted doubling of turnover within 14 months from March 22.
I will now request the moderator to open up lines for Q&A. Thank you very much.
Questions and Answers:
Operator
Thank you very much. We’ll now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Praveen Sahay from Prabhudas Lilladher. Please go ahead.
Praveen Sahay — Prabhudas Lilladher — Analyst
Thank you for taking my question. The first question is on the in-house and outsourcing contribution in the cemetery and the process segment. How much that for the quarter?
Ayush Bagla — Executive Director
So for the quarter, in Sanitaryware, outsourcing was 60% of overall sales. And in-house manufacturing was 40% in faucetware outsourcing was 49% and in-house was 51%. For the year, in Sanitaryware, outsourcing was 59% and in-house was 41% and for the year in faucetware outsourcing was 52% and in-house was 48%
Praveen Sahay — Prabhudas Lilladher — Analyst
Okay. The next question is related to the mid segment contribution, as well as your faucet contribution also on the increase in the last six quarters, I’m continuously seeing. So is it fair to assume your corporate segment is largely in the mid segment of product segment? And if you also give some indication on the margin differential in the Sanitaryware and the faucet
Ayush Bagla — Executive Director
So [Indecipherable] I’ll just give you some statistics to add more color to the answer. In Sanitaryware, our composition of sales is entry-level 25%, weight and premium is 57%. In faucetware, entry is 26%, weight is 48% and premium is 24%, but that’s not the reason why you’re seeing Faucetsware growing. The unorganized to organized shifted Sanitaryware has more or less laid out whereas in Faucetsware it is nowhere near laid out. And the unorganized market in Faucetsware continues to be INR5,000 crores. That market is fully available over the next many years. And the second aspect is Cera related Faucetsware market share is double-digit. It is the second largest player in the industry, but it’s incrementally market share. So the share of the growth that Cera is monetizing 1.5 times to two times its incremental market share.
Praveen Sahay — Prabhudas Lilladher — Analyst
Okay. Okay. So, any margin differential between these two products?
Ayush Bagla — Executive Director
See, normally, we don’t split the margins between our various businesses. We just focus on the blended number. And the reason for that is we don’t want to give out our pricing and margin strategy to the market.
Praveen Sahay — Prabhudas Lilladher — Analyst
Okay. Thank you. And sir, the question on the growth this quarter because this year you have delivered a very high-growth in both the segments around 7% to 8% and overall addition of incremental sales in the range of around INR350-odd crores. What’s your guidance for 2024-2025?
Ayush Bagla — Executive Director
See, again, I’d like to focus on the overall larger picture that we had painted in March and April 2022 of reaching a run rate of INR2,900 crores by September 25, that required a CAGR of 17%, 18%. We have achieved much more than that. So now most of the investors and people in the financial community are calling us and telling us at aim of 2,900 by September 25 is a very conservative target. So if you just work backwards from that number, we’ll need to add about INR350-odd crores of top line every year which we have delivered this year. And going forward, that will be the trajectory.
Praveen Sahay — Prabhudas Lilladher — Analyst
Great sir. And the last question, sir, related to your advertising budget. So this year, definitely, there is a good jump in that. So is there any one-off, because you had a new brand investors as well or that will continue on the yearly basis the way forward?
Ayush Bagla — Executive Director
Normally the, spend were 3.5% to 4% of top line and the manner in which top line is increasing. That number will remain between 4% and 4.5% of top line. But the absolute number will increase in relation to the top line. And the benefit of this expense in Q4 and during FY 2023 is both in the short term and in the medium-term. So we are seeing a difference in pricing power and premiumization of our products.
Praveen Sahay — Prabhudas Lilladher — Analyst
Okay. Great. Thank you sir and all the best.
Operator
Thank you. Next question is from the line of Vijay Kedia from Kedia Securities. Please go ahead.
Vijay Kedia — Kedia Securities — Analyst
Yes. Hi. Ayush and Vikas. This is Vijay Kedia. Thank you very much and congratulations for these wonderful numbers. This has really surprised us, at least me to me and I just want to understand one thing from you. One thing I would like to tell you, that ever since we have joined the company, the shape and size of the company has really changed dramatically. And various occasions, whenever I met your competitors, I was told that you have taken some really out of the box decisions in the last two years and your competitors and near technical whether they are going to bring positive results for the company or not. But actually, you to have proof thus wrong, my hope in the future also even though were wrong. So whatever you have done differently than others, I just have one simple question that, maybe the efficiency of your competitors has also played an important role. It’s not a significant role, but it will appeal in your numbers or in your growth. So I just want to understand from you that, of course, and all of them are very strong, capable and compatible. So what would happen is they will also strike striking back, which I am sure because most of the problems side gas, met and all are behind us. So they will also start recovering. So where would you stand out in that circumstance. Thank you, sir.
Ayush Bagla — Executive Director
Thank you, Mr. Kedia, for taking time to attend the call and also participating. You see this is an entirely entire team effort by Cera and right from the shop floor to serving new technologies is increasing new products. So I’ll just give some background, new products in the industry are 10%, 12% of sales for the industry as a whole. And for Cera, there were 22%, 24% of sales. Now they are 34% to 39%, depending on which quarter you look at. These are all new sales, which were not previously available, but our incremental sales at much higher margin. So all around the Cera team has delivered, and it’s a testimony to the execution skill — so as far as competitive intensity is concerned, competitive intensity, whether from the large Indian players or MNC players or large building material companies was always there. And we expect it to keep on getting here, sir, but we have both the bandwidth in terms of products, manufacturing capability, technological expertise to meet that challenge — and not only is the consumer evaluating us at every step, but even retailers, dealers, we can have a lot of feedback from them, we execute accordingly. So those are some of the levers. And there were a few concerns about the company five, six years ago, but the governance level in the company would be at par with the best companies of corporate India, the really blue chip company. So those are things that I think the investors have really appreciated. And the company’s debt free high cash decisions have all been ROC accretive over the last many years. Those are the things which have made the company perform in the way it has over the last few years. So other than that, I can only say that going forward, we want to maintain the same growth trajectory, both in top line and bottom line as well as offerings to the consumer. So ultimately, the validation by the consumer results in all the financial metrics being met.
Vijay Kedia — Kedia Securities — Analyst
Yeah. Okay. Just one last one point, INR87 crores lying in the safe instrument, when are you going to utilize that funding from low risk and high return kind of investment
Ayush Bagla — Executive Director
So we are currently just working on our brownfield expansion in faucetware and the greenfield expansion in Sanitaryware, Other than that, there is no current capex that is lined up, if there is a good opportunity in organic, the company will definitely evaluate it. But other than that, the company has been very conservative and that’s one of the reasons for its success
Vijay Kedia — Kedia Securities — Analyst
Okay. Thank you, sir.
Ayush Bagla — Executive Director
Thank you
Operator
Thank you. [Operator Instructions] The next question is from the line of Akshay Chheda from Canara Robeco Mutual Fund. Please go ahead.
Akshay Chheda — Canara Robeco Mutual Fund — Analyst
Yea. So thank you for the opportunity. Just one question. So sir, if we see the gross margin, so in Q2, it was a good number of around 55%, 55.5% — but then if we see the last two quarters, it has cooled off to around 53.3% — so what is it that — is it the raw material which is hurting us or how should we see it? Because on one side, if we see raw materials benign and even if we are improving the product mix. So then how should we look at the gross margins going forward?
Ayush Bagla — Executive Director
If you will go to cherry pick one number from one quarter then I could also give you the baseline of gross margin, which has always been between 48% and 50% of the last many years. We have 300 basis above that currently for the quarter and also for the year, we have 400 basis above that. So company is operating at a much higher level in manufacturing efficiencies. And the baseline number of 40% to 50% has been surpassed in one particular quarter, if it becomes 55% that is not really — I wouldn’t recommend that, that is the new benchmark.
Akshay Chheda — Canara Robeco Mutual Fund — Analyst
Okay. So and how should we look at it going forward?
Ayush Bagla — Executive Director
I think anything about 52% would be a very acceptable number. And that is a number that is optimal because — that takes into account the high capacity utilization, spreading the fixed cost over a large number of products, management of both raw materials and all other costs associated with manufacturing.
Akshay Chheda — Canara Robeco Mutual Fund — Analyst
Okay. Okay, sir. Thank you.
Ayush Bagla — Executive Director
Thank you.
Operator
Thank you. The next question is from the line of Mihir Damania from Ambit Asset Management. Please go ahead.
Mihir Damania — Ambit Asset Management — Analyst
Yes. I have one question. It was — so we’ve seen other building materials companies catering to a wider basket of product including your point of your closest competitors who has kind of aged under a lighting brand. So since we have like a huge profile of cash of INR700 crores, are we looking to maybe look at agents — are you open to looking at it? And can we see something on that trend in the next couple of years or so?
Ayush Bagla — Executive Director
See, currently, there are no plans or no proposal in front of the board to diversify and specialty diversification into unrelated areas, lighting and electrical goods or even mild goods are all unrelated businesses. They are like a decision to be taken independent of the current business. And many of these sectors — I’m not talking about any particular company or business but are very crowded marketplace, where margins are much lower than what we are used to in our current businesses. So still any business achieve a certain ROC threshold, even on paper, we don’t want to even evaluate such an opportunity. So currently, there is no such evaluation going on. But let’s see if we keep on expanding our current two main businesses, first through a brownfield and a greenfield venture. And maybe there’s some inorganic opportunities in those businesses as well.
Mihir Damania — Ambit Asset Management — Analyst
Got it. Okay. Thank you for. That’s it from my side
Operator
Thank you. Next question is from the line of Rana [Phonetic] from Equirus Securities. Please go ahead.
Rana — Equirus Securities — Analyst
Yes. Good morning, sir. Congratulations on very good set of numbers. Sir, I wanted to understand on the incremental dealer distributor addition that you have done and FY ’23 versus, let’s say, three years — three or four years before. So can you just share how the dealer and distributor addition has been a focus area for the company?
Ayush Bagla — Executive Director
So I’ll give you some numbers. The dealers in March 22 was 4,260, which in March 23 have become 5462. And the retailers were around 11,300, which are now around 14,600. But at the same time, the size of large dealers have grown — so large dealers are anything between INR20 crores to INR40 crores in top line. That is the revaluation of the last two, three years, that being a dealer in sanitary ware is a very profitable business allowing them cash flow to expand geographically more salespeople increase opex and capex is there at the retail end and the dealer and where some of our dealers have large warehouses, large inventory of their own. So what we are seeing is the large dealers will continue to expand, and that is going to be our focus. So making sure a INR5 crore dealer becomes a INR15 crore dealer, I think over the next two, three years, that is going to be the focus.
Rana — Equirus Securities — Analyst
Okay, sir. And sir, is it — can we say that the Tier two and three cities are seeing better growth for you versus, let’s say, three or four years before
Ayush Bagla — Executive Director
There are all different markets for different products. And Tier three cities, maybe 10, 15 years ago was a market for inexpensive products or affordable products, not anymore. So Tier two and Tier three towns are now consumers of also luxury products. So for us, we are not really that bothered about where our sales go, but I would tell you something that dealers in Tier two and three towns have a larger footprint, they have better relationships with plumbers, civil contractors, architects and other influencers. So the ability to sway customer in those towns is much higher than in a Tier one term. And in Tier one towns, MNCs are fully focused on Tier one markets. So our focus is across all three markets. As you can see, even our share of sales in Tier one markets is increasing.
Rana — Equirus Securities — Analyst
Right, sir. And sir, any guidance on EBITDA margins for next two years, that is FY ’24 and ’25
Ayush Bagla — Executive Director
We have predicted 50 to 75 basis over one year, and we are already at 103 basis for the year. So I think I would say, we have achieved what was to be achieved in two years in one year, even maintaining the 17.96 number would be a great number to have with other income and 15.88 without other income would be a great number to have for FY ’24.
Rana — Equirus Securities — Analyst
Sure, sir. Thank you very much.
Operator
Thank you. Next question is from the line of Dhananjay [Phonetic] from ASK Investments. Please go ahead.
Dhananjay — ASK Investments — Analyst
Hi, sir. Thank you for the opportunity. Just wanted to ask you, sir, what would be our market share in both faucetware sanitary and our market like a position also?
Vikas Kothari — Chief Financial Officer
You see, Dhananjay, for us to give out any number, which is anecdotally, would not be correct because we don’t have any third-party agency like Technopack or someone making out a report on a relative market share. So we are the largest player in sanitaryware without doubt. And the second largest player in faucetware and growing much faster than all the players behind us in faucetware. So implementing market share, which is a more relevant statistic is the highest in Cera’s case in faucetware. And in sanitaryware, we are just guarding our number one position.
Dhananjay — ASK Investments — Analyst
And just to have an idea, how far would the number two — if you had to ballpark or any idea what would number two be in that sense?
Vikas Kothari — Chief Financial Officer
See, it’s difficult for me to talk about any other company.
Dhananjay — ASK Investments — Analyst
Okay. And I see the good growth we’ve seen in our numbers, would this be industrial formula? Or are we seeing some market share gains
Vikas Kothari — Chief Financial Officer
If you remember, during our Q3 call, there were a lot of questions on volatility of demand during Diwali and post Diwali. We expect that we did not see that kind of volatility in our office. The same thing happened in Q4, so different industry players have different dynamics and pricing decisions that they make. In our case, the focus on B2C segment and just focusing on the product rather than any other intangibles have made our numbers work. And we have really come out of the typical housing and interest rate city
Dhananjay — ASK Investments — Analyst
Sure. Okay. And I guess then thirdly, last question. Just any possible breakup between the — how much of our revenues come from, let’s say, metros or Tier one versus Tier two Tier three?
Vikas Kothari — Chief Financial Officer
Yes. I will give you that number. Tier one is 31% of sales.
Dhananjay — ASK Investments — Analyst
Okay.
Vikas Kothari — Chief Financial Officer
Tier two is 22% of sale and Tier three is 47% of sale.
Dhananjay — ASK Investments — Analyst
Okay. And this is on a combined basis, right?
Vikas Kothari — Chief Financial Officer
Yes, and exports are for the quarter, 1% of sales. And for the year, it’s between 1% and 2% of sales.
Dhananjay — ASK Investments — Analyst
Okay, sir. Fantastic. Thank you so much.
Operator
Thank you. Next question is from the line of Udit Gajiwala from YES Securities. Please go ahead.
Udit Gajiwala — YES Securities — Analyst
Yes. Hi, sir. Thank you for taking up my question. So just following up on the previous participant, given that the market that you mentioned that the other players have taken price hikes for the last two quarters now, so there could be an element that this is there’s a volume driven for us. There could be some element of market share gain? Is it a possibility?
Vikas Kothari — Chief Financial Officer
Other players took price rises in October, November ’22, which we did not at that time. And our manufacturing efficiencies have beaten the effect of both inflation and RM changes and changes in labor and any other costs. So that we were happy to pass on those benefits to the consumer. And of course, we also knew that, that will increase our market share. So that’s exactly what we followed. The last price hike we had was May ’22, almost 12 months ago.
Udit Gajiwala — YES Securities — Analyst
Understood. Understood. And sir, secondly, your margins, you mentioned that even if at these levels, you will be comfortable. But given that the RM pressure is coming down and with the premiumization basket going up, what we see that you’re being conservative maybe in terms of maintaining your margin guidance? Or we might see some 50, 70 basis points uptick? Is it a possibility?
Vikas Kothari — Chief Financial Officer
Well, we had expected 50 to 75, we delivered 103. So that is something that we have delivered for two years and one year. We’ll be happy with these margins if we are stable. And what you said, the RM is pulling off. Margins may increase with INR350 crores, INR400 crores of sales are added this year as well, so we’ll wait for those things to play out before guiding.
Udit Gajiwala — YES Securities — Analyst
Okay. And just last question, if I may squeeze in. sanitaryware given that now we are moving more towards the outsourced with the capacity. Do we see some squeezing of growth in sanitaryware or you outsource may increase and that’s why even margins would be there?
Ayush Bagla — Executive Director
So outsourced, you see, we work with, let’s say, there are 50, 60 plants in the country give us at only 10, 12 who meet our quality parameters. So currently, within those 10, there is no capacity constraint. And even our in-house manufacturing, the strategy we have adopted is to make sure all complicated products are made in-house. And products which were previously made in-house are sent to outsourcing partners, freeing up fresh capacity to take in newer products. So it’s a mix and it’s an evolving mix of which product to make in-house and which products we take outside. There capacity constrained, both in the in-home capacity and from our outsourcing partners. And the proof of that is the inventory days. The sector always had a problem of inventory and availability. And we’ve had eight straight quarters of no element of lost sales. So the inventory levels are at the optimum level right now.
Udit Gajiwala — YES Securities — Analyst
Got it. And lastly, on capex, you said that 24 will be how much, excluding your brownfield that is?
Ayush Bagla — Executive Director
So I’ll just give you some numbers. For FY ’23, ’24, a total of INR34.78 crores is planned of which INR11 crores will be sanitaryware automation, INR4 crores for faucetware automation, INR7 crores customer touch points, INR7 crores land and building at the current manufacturing facility and INR4 crores in logistics and IT. And I can also give you what was achieved last year. We had a budget last year outside of the INR69 crores for the faucetware brownfield of INR24.7 crores. of which INR20.49 was spent, and they were spent in INR6 crores for sanitaryware automation, INR3 crores for faucetware automation, INR4 crores on customer touch points, INR2.5 crores on land and building in our current facility and INR5 crores on logistics and IT.
Udit Gajiwala — YES Securities — Analyst
Thank you. Thank you, Ayush for answering all the questions.
Operator
Thank you. [Operator Instructions] The next question is from Shrenik from LIC Asset Management. Please go ahead.
Shrenik Jain — LIC Asset Management — Analyst
Hello. Thanks for the opportunity.
Operator
Shrenik sorry, but there’s a lot of static from your line.
Shrenik Jain — LIC Asset Management — Analyst
Hello. Hello. Is it better?
Operator
No, sir. It’s still the same. May I request you speak with the handset?
Shrenik Jain — LIC Asset Management — Analyst
Hello. Is it better now?
Operator
Yes. Go ahead.
Shrenik Jain — LIC Asset Management — Analyst
Thank you for the opportunity, sir. Sir, basically, I wanted to understand that we are expecting a 17% to 18% revenue CAGR for the next three years. So I understand the real driver for our sales, but we are already one of the best companies in terms of distribution as we — our distributions by deep in Tier two, Tier three, four cities. So what will be the key driver for growth from here? Like what has structurally changed for the industry and for us?
Ayush Bagla — Executive Director
Shrenik, we don’t need to do anything differently. We just have to execute in the same manner that we have been doing for the past seven, eight years. So that includes enhancing product technology, maintaining the same product quality and at the price that it’s made available and this distributed logistics distributed inventory availability. So we have to continue to do the same things we have done and not do anything different. The demand from all three Tier one, two and three towns is available. The replacement demand, home improvement demand is for gearing. And the industry is expanding in force whether conversion from unorganized to organized is taking place in sanitary where the industry size was so small that size is increasing dramatically.
Shrenik Jain — LIC Asset Management — Analyst
Okay. Got it. And sir, can you throw some light on the other large private players in the likes of [Indecipherable] are performed relative to us. And say, on that, secondly, as they are increasing the penetration in smaller cities, are we swiftly increased competition from these plans?
Ayush Bagla — Executive Director
See the competitive intensity was never low in this industry whether you talk about the four large companies in India or seven, eight MNCs, the competitive intensity for dealers, for retailers and for customers was always very high. But for me to talk about any other company will be very difficult. But you’ll find that Cera has been outperforming all other players in the industry on any of the metrics. So it’s product, technology, pricing, placement and of course, all that translates into investor return and financial metrics. And most importantly, free cash flow. That is one of the most important focuses of this company.
Shrenik Jain — LIC Asset Management — Analyst
Got it, sir. And sir, basically, just on, again, the cash question, currently, ROC is around 26% with such high cash on books, right? So going ahead, do you have any plans to better utilize the capital that is available on our books around INR650 crores in investments which can improve our ROC and ROE
Ayush Bagla — Executive Director
Currently, they are passed in safe instruments. And you rightly said ROC is already high. If you take away the liquid cash from the capital employed, then that ROC number will dramatically increased. So one of the steps that have been taken is to increase the dividend payments over the last two years, our average dependent payment, which used to be 17%, 18% of PAT is now 31%, 32% of PAT. And PAT has also more than doubled the average PAT of the last 10 years was between INR100 crores and INR110 crores. This year it’s INR29 crores. So both the absolute number and the dividend payout ratio all have dramatically changed. And having this availability of cash has provided us additional flexibility. So both the brownfield and greenfield capex, we can — we have been able to move without the need to raise any resources or without the need to change our business practices to bring in more cash flow
Operator
Thank you. [Indecipherable] I request you rejoin the queue. The next question is from the Sonali Salgaonkar from Jefferies. Please go ahead.
Sonali Salgaonkar — Jefferies — Analyst
So thank you for the opportunity. Sir, first question is related to the industry. I understand you cannot share your market share data. But can you please give us the updated numbers of the market size and organized proportion of sanitaryware, faucets and tiles, please?
Ayush Bagla — Executive Director
Again Sonali it will be anecdotal data, the data we collect from our sales force in various offices. So again, that is not something that will be correct to give to any outside community.
Sonali Salgaonkar — Jefferies — Analyst
No problem, sir. I understand. Sir, my second question is about the tile industry in Morbi. Any update on the competition emerging over there? So are exports on track? Or are you seeing a slowdown in the exports? And are you seeing them coming with a higher competition in the domestic market
Ayush Bagla — Executive Director
Sonali, you have been regular on our call so many years. You know the commentary we’ve been making about tiles that the tile industry is going through a very difficult phase, and it will continue to remain at is because of significant overcapacity in the industry and one of the players having any pricing power. So that remains. And exports have not grown in the same pace that they were growing for the last four, five years. That has resulted in a significant glitch in the domestic industry, price is not moving up or even demand is more or less stagnant. So the number of plants kept on [Indecipherable] there is no barriers to entry for SME entrepreneurs to put up a plant for a very small amount. And that’s over fragmentation of the industry, which will take a few years to sort out.
Sonali Salgaonkar — Jefferies — Analyst
Understand. Sir, my last question is, could you enumerate what is the approximate average price hike that Cera has taken in FY ’23 across sanitaryware, faucet and tile segment separately, please?
Ayush Bagla — Executive Director
So I will give you some numbers. In FY 2023, there was only one price hike, and that was in May 2022. 3% in Sanitaryware and 5% in faucet wares. And before that, the last price hike was November 2021. So, in calendar year 2022, there was only one price hike. And in the financial year 2023, there was only one price. There was a price rationalization exercise earlier this year in calendar year 2023, which resulted in a 50 basis point increase in price because we went for a uniform MRP across all products and all states, irrespective of the freight costs.
Sonali Salgaonkar — Jefferies — Analyst
Understand. Sir and none in tiles, right?
Ayush Bagla — Executive Director
Tiles, there are just too many products. I’ll just give you some information on price. Now, the soluble salt commoditized tiles is only 4% of sales for Cera. The rest is 40% is GVP, 21% is double charged. Wall tiles at 24% and other trading and outdoor tiles are 12%. So, there is a little bit of pricing power in GVP and double charge. And the commoditized version, we have restricted ourselves to just 4% of our overall title sales where we have ongoing commitments.
Sonali Salgaonkar — Jefferies — Analyst
Got it, sir. Thank you. That’s all from my side.
Operator
Thank you. Next question is from Aakash [Phonetic] from UTI Mutual Fund. Please go ahead. Aakash, may I request to unmute your line and go ahead with your question please.
Aakash — UTI Mutual Fund — Analyst
Hello.
Operator
Go ahead.
Aakash — UTI Mutual Fund — Analyst
Am I audible?
Ayush Bagla — Executive Director
Yes.
Aakash — UTI Mutual Fund — Analyst
Hi, good morning Ayush. Many congratulations on great set of numbers. Just had few questions. One is how much has been the decline in brass prices? And are we planning to cut MRP or, let’s say, realization of quarter where — to ensure that — I mean to stay ahead of competition. I mean competition would — I mean would competition be — I mean taking price cut in faucetware?
Ayush Bagla — Executive Director
See as I give you the RM behavior of brass and zamac for the full year first. There was a 10% increase in brass prices for 12 months, FY 2023, of which 5.12% increased in Q4. And zamac, which is used to make the handles of single lever, there was a 24% increase for 12 months, of which 7% increased in Q4. Despite that, we didn’t have to take any price hikes since. So, you can understand that we are passing all the gains made in efficiency to the consumer and also absorbing any changes in RM in levers. So, that was as far as FY 2023 is concerned, even if these prices pull off, which has been most likely will, there is no proposal or there is no past history or trend of decreasing prices or decreasing MRP.
Aakash — UTI Mutual Fund — Analyst
Sure. And usually, if let’s say, raw material prices correct, then usually discounts increase or we take price cut in MRP terms?
Ayush Bagla — Executive Director
Normally, the brand like Cera, which has pricing power, don’t have to change any behavior with changes in RM. So, we don’t have to increase discounts or decrease MRP. Yes, sometimes there are combo offers, but that is in the regular course of business not related to changes in raw materials. So the whole point of spending the kind of money we do on advertising, publicity, creating a brand, creating a technology and spending so much on technology and the shop floor is to make sure that our MRP doesn’t move along with any kind of RM or any other costs or demand factors.
Aakash — UTI Mutual Fund — Analyst
Sure. And apart from — I mean, so our EBITDA margin this quarter reduced by about 70 to 80 bps as compared to last year’s same quarter one factor was increase in ad spend, but any other factors that led to this decrease in margin?
Ayush Bagla — Executive Director
See, if you look at EBITDA without other income is INR16.04 versus 18.78. And the ad spend increase of INR17 crores for the quarter is if you add back to the EBITDA numbers, it increases to more than last year’s EBITDA margin. Other than that, there was no other change. All other costs were in line with revenues.
Aakash — UTI Mutual Fund — Analyst
Okay. Understood. Thank you very much and all the best.
Operator
Thank you. Next question is from the line of Omkar [Phonetic] from Shree Investments. Please go ahead.
Omkar — Shree Investments — Analyst
Yeah. You mentioned this to several participants. Just wanted to know what’s management thinking on, say, a buyback in this regard? Since you have lots of cash. Just wanted to management thinking on this
Ayush Bagla — Executive Director
We recognize that the buyback is a very tax-efficient way of distributing cash to shareholders and we are alive to those possibilities, but we have not taken any kind of proposal to the board on buyback. However, the Board is always keen to distribute more to shareholders. And that’s why you’re seeing INR18 crore distribution becoming INR65 crores, INR66 crores this year. And last year, it was about INR46 crores. So that’s one of the ways of distributing tens. Other than that, buyback is not really been evaluated at the board level so far.
Omkar — Shree Investments — Analyst
Correct. But is the management open to buyback? Or like what’s the thinking just wanted to know?
Ayush Bagla — Executive Director
That is a decision that I think after all the capex brownfield, greenfield of the company play out, that is another decision that can be evaluated seriously. But currently, there is no such proposal.
Omkar — Shree Investments — Analyst
Okay. Other question was on the land acquisition, which we are supposed to do, I guess, in the next six months. So I just wanted to know when can the greenfield project, it will be commenced. And what was the addition to the existing thing? And how much it can contribute to the overall, like how much sales it can add once it starts — it becomes operational and working at 100% capacity.
Ayush Bagla — Executive Director
So the plan is to complete the land acquisition and approval within this calendar year and most likely by October, November that at around INR25 crores, another INR100 crores will be spent on plant machinery and technology in the sanitaryware facility, which will take, let’s say, 18, 20 months post all land acquisition and approvals. And the initial capacity will be modular, initial capacity could be 12 lakh units and 12 lakh pieces per year. And the top line will be close to INR300 crores. So asset turns for that will be between 2.25 and three. As far as the faucetware facility is concerned, we have almost seeing the end of that brownfield expansion, the cost of INR69 crores. The addition is INR1 lakh pieces per month or 12 lakh pieces per year to take the capacity to 48 lakh pieces a year. And asset turns, because it was brownfield and there was no land cost, etc., will be around 3.5 times.
Omkar — Shree Investments — Analyst
So as far as the sanitaryware is concerned, it would take another 2.5 to three years to commence the facility, right?
Ayush Bagla — Executive Director
No, 18 to 20 months after the zero date and the zero date will be set after the land acquisition is over and approvals are in place. So, we’ll wait for the zero debt again to be set by the end of the year.
Omkar — Shree Investments — Analyst
Okay. And till then, whatever you are comfortable with the outsourcing level and whatever the capacity utilization around 115% to 18%. You are comfortable with that.
Ayush Bagla — Executive Director
That’s right — inventory gain.
Omkar — Shree Investments — Analyst
Okay. And this is the enough — this is fine with you guys to meet the existing demand as well as the future demand?
Ayush Bagla — Executive Director
That is correct. That is correct.
Omkar — Shree Investments — Analyst
Okay. All right. Thanks a lot.
Ayush Bagla — Executive Director
Thank you.
Operator
Thank you very much. I now hand the conference over to the management for closing comments.
Ayush Bagla — Executive Director
Thank you very much. I would like to thank everyone for attending this call and for showing interest in Cera Sanitaryware. Cera remains positive at a strong positioning in the industry and improving macros would help it to deliver steady and consistent growth going-forward. Should you need any further clarification or would 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 and see you all next quarter. Thank you very much.
Operator
[Operator Closing Remarks]