Buy Somany Ceramics: target of Rs 304: ICICI Securities

ICICI Securities research report on Somany Ceramics

We hosted Mr. Abhishek Somany, MD of Somany Ceramics, for the I-Sec Virtual Corporate Day event. The key takeaways from the event, which saw participation from 7 marquee investors, include: a) Faster-than-anticipated recovery in volumes thus far; b) impressive cash collection since Jun’20 leading to sizeable cash surplus situation (on standalone basis) despite prepayment of term loan worth Rs250mn in Aug’20; c) last phase of unwinding of treasury operations under way (left over ICDs at mere Rs120-130mn); likely paring of debt to the tune of Rs1bn over the next 12 months; e) likely fixed cost reduction of Rs500-550mn in FY21E of which Rs100-120mn would be of sustainable nature; and f) structural improvement in EBITDA margins with close to double-digit margins in FY21 (exQ1), 11-12% in FY22 and moving back to 13-14% margin trajectory post FY22.

Outlook

Maintain BUY.

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