Reliance Securities is bullish on Somany Ceramics has recommended buy rating on the stock with a target price of Rs 1020 in its research report dated September 12, 2017.
Reliance Securities' research report on Somany Ceramics
Increasing premiumisation, higher share of organised industry post-GST roll-out, operating leverage and asset light expansion model will be the key growth drivers for Somany Ceramics (SCL), going forward. Expecting SCL to report revenue and earnings CAGR of 13.8% and 24.6%, respectively through FY17-19E coupled with attractive valuations (23.5x FY19E earnings), we initiate coverage on the stock with a Target Price of Rs1,020, which implies an upside of 28% from the current levels.
We estimate SCL to report consolidated revenues of Rs20.2bn and Rs23.5bn and net profit of Rs1.1bn and Rs1.4bn in FY18E and FY19E, respectively. Based on expected EPS of Rs34.1, the stock currently trades at an attractive PE multiple of 23.5x FY19E earnings. We are positive on the Company on the back of its strong brand equity, increased salience of organised players and continued focus on high-margin segment coupled with attractive valuations. We initiate coverage on SCL with BUY recommendation and Target Price of Rs 1,020 based on 27x Sep ’19 earnings, which is at a 20% discount to industry leader Kajaria’s target multiple.
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