Buy Somany Ceramics; target Rs 97: Sushil Finance

Sushil Finance's research report on Somany Ceramics

"Somany Ceramics has developed a strong brand image with a wide variety in tiles and a robust distribution network. It is the first and only company in Indian tile industry to have a patent for its highly abrasion resistant tiles “VC Shield”. The company has a pan India presence with a network of more than 1500 dealers, 6000 + sub dealers and 181 retail showrooms. It has a strong presence in Northern and Southern Regions accounting for 36 percent and 33 percent of the total turnover respectively, followed by eastern, western and central region accounting for 15 percent, 11 percent and 3 percent of total turnover respectively."

'Its revenue has grown at a CAGR of 24 percent in the last four years to Rs.10,538.7Mn, backed by encouraging volume growth of 14 percent. Its Sales volume has increased from 20 MSM in FY09 to 33.4 MSM in FY13 with increasing share from JV's and outsourced tiles. Management Efficiency is also well reflected in the reducing working capital cycle, from 109 days in FY09 to 37 days in FY13. Its D/E has also fallen gradually to 0.9x in FY13 from 2.1x in FY09."

"Outlook and Valuation: Somany Ceramics is likely to grow at 15 percent for the next two years on the back of rising tiles demand, targeting tier II and III cities, strong distribution network, focus on value added products & consistent capacity addition both organically as well as inorganically. It is currently trading at 4.9x its FY15E EPS of Rs.13.9. Considering the past performance & future growth potential, we recommend 'BUY' for the stock with a price target of Rs 97 (7x FY15E EPS)," says Sushil Finance research report.

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