Buy Somany Ceramics; target of Rs 604: ICICI Securities

ICICI Securities's research report on Somany Ceramics

Somany Ceramics (SOMC) reported lower-than-expected (vs I-sec estimates) Q2FY26 consol. revenue growth of 2.8% YoY with tile volume flat YoY (6-year CAGR of 6%). Consol. OPM fell 59bps YoY (-16bps QoQ) to 7.8%, as gross margin (including power and fuel cost) fell 172bps YoY, resulting in an EBITDA decline of 4.4% YoY. Management stated demand conditions were subdued in Q2FY26, further aggravated due to heavy rains in North India. It guides for mid to-high single-digit tile volume growth in FY26, with OPM expanding 100–150bps over FY25 OPM (aided by operating leverage and better capacity utilisation).

Outlook

We tweak FY26–27E EBIDTA by ~4.8–1.6% and maintain BUY, due to reasonable valuations with a rolled-over unchanged Sep’26E TP of INR 604.