Buy Somany Ceramics, target price Rs 660: HDFC Securities

HDFC Securities has buy call on Somany Ceramics with a target price of Rs 660 The current market price of Somany Ceramics is Rs 443.3. Somany Ceramics, incorporated in 1968, is a Small Cap company with a market cap of Rs 1776.45 crore, operating in Building Materials sector.

Somany Ceramics' key Products/Revenue Segments include Ceramic Floor & Wall Tiles, Others, Other Operating Revenue, Scrap, Export Incentives and Sale of services for the year ending 31-Mar-2024.

Financials
For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 646.68 crore, down -3.14 % from last quarter Total Income of Rs 667.65 Crore and up 5.16 % from last year same quarter Total Income of Rs 614.95 Crore. Company has reported net profit after tax of Rs 9.67 Crore in latest quarter.

The company?s top management includes Mr.Shreekant Somany, Mrs.Rumjhum Chatterjee, Mr.Rameshwar Singh Thakur, Mr.Siddharath Bindra, Mr.Ravinder Nath, Mr.Vineet Agarwal, Mr.Salil Singhal, Mr.Ghanshyam Girdharbhai Trivedi, Mr.Abhishek Somany, Mr.Manit Rastogi. Company has Singhi & Co. as its auditors. As on 31-12-2024, the company has a total of 4 crore shares outstanding.

Investment Rationale
The unorganized Morbi tile manufacturers have significantly disrupted the industry by flooding the domestic market with low-priced products. Given the ongoing geopolitical tensions, Indian tile exports are expected to remain volatile. Consequently, the challenge of Morbi dumping will most likely continue to suppress tile player volume growth and margins. While strong real estate sales have provided some impetus to the tile sector, much of this potential growth has been offset by Morbi's aggressive pricing. Somany's new large-sized tiles Max plant in Gujarat, with a 4.5 MSM capacity commissioned at the end of January 2024, is expected to boost volume growth and enhance the product mix. We project a 7% tile volume growth for Somany from FY24 to FY27E. HDFC Securities forecast a 7%, 6%, and 11% CAGR for revenue, EBITDA, and APAT, respectively, during FY24-27E. Although they maintain the estimates, the topline and bottomline projections are ~2% and ~8% below consensus for FY25-27E. The brokerage remains positive on Somany due to its robust retail distribution, improving product mix, and efficient working capital management. They have reiterated a BUY rating on Somany Ceramics with an unchanged target price of Rs 660/share (22x Sep-26E consolidated EPS).

Promoter/FII Holdings
Promoters held 55.01 per cent stake in the company as of 31-Dec-2024, while FIIs owned 1.56 per cent, DIIs 23.59 per cent.