Cholamandalam Securities is bullish on Somany Ceramics has recommended buy rating on the stock with a target price of Rs 400 in its research report dated August 06, 2019.
Cholamandalam Securities' research report on Somany Ceramics
In 1QFY20, SCL’s revenue grew by 3.9% YoY to INR 4bn, on account of increase in sales volume to the tune of 8% YoY. During the quarter, the company sold 11.9msm tiles with a blended realization of INR 288/ sq. mtr., down -1.4% YoY. Management stated that volumes were affected by poor demand conditions and the company’s tight monitoring on receivables. SCL has guided for high single-digit to low double-digit volume growth in FY20 (vs. a minimum of double-digit growth guided earlier for the tiles segment). Revenue from sale of own manufactured tiles fell 1.34% YoY to INR 1.4bn. Revenue from JVs rose 1.83% YoY to INR 1.3bn while it grew 41.57% YoY to INR 691mn from others. Revenue from Sanitaryware/faucet fell 13.84% YoY to INR 19mn. Sales mix in the quarter stood was Own manufacturing (37%), JVs (40%) and Others (23%). Own manufacturing volumes de-grew by 1.7% YoY to 4.75msm, JV volumes grew by 5.1% YoY to 4.52msm and other tiles volumes grew by 28.6% YoY to 2.61msm.
With the addition in value added capacities and stress in Morbi cluster, the management has guided for double digit volume and sales growth in FY20E. At CMP of INR 319, the stock is trading at 18XFY20E and 12XFY21E earnings. We maintain a BUY rating on the stock with a target price to INR 400 based on a target P/E of 15XFY21EPS.
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