Sep 13, 2017 04:52 PM IST | Source:

Buy Somany Ceramics; target of Rs 1020: Reliance Securities

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.

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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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