Buy Somany Ceramics; target of Rs 928: ICICI Securities

ICICI Securities's research report on Somany Ceramics

In Q1FY25, Somany Ceramics (SOMC) reported consol. revenue decline of 1.4% YoY, as tiles volume declined 0.9% YoY (5-year CAGR of 5.5%). Consol. EBITDA margin decreased 16bps YoY/231bps QoQ to 8.5% due to negative operating leverage, while RM costs (including power and fuel cost) fell 229bps YoY/225bps QoQ, resulting in EBITDA/APAT decline of 3.2%/37.5% YoY. Management stated demand conditions were subdued in Q1FY25 but remained optimistic of it improving in H2FY24 led by buoyant housing market; it maintained guidance of double-digit tile volume growth in FY25 with EBITDA margin increasing 100–150bps YoY.

Outlook

We tweak our PAT estimates by 4%/3% for FY25-26E and maintain BUY with a rolled-over Jun’25E TP of INR 928 (earlier INR 916), set at an unchanged 22x PER.