Choice Equity Broking's report on Somany Ceramics
We maintain our BUY rating on Somany Ceramics (SOMC) with a target price of INR 635/share. We factor in: 1) Volume CAGR of 9% over FY25–28E driven by market share gains from unorganised players in the Tiles segment, 2) Bathware segment revenue CAGR of 12% over FY25–28E, 3) Revenue contribution of 17%/11% from Projects/Bathware segments, respectively. Strong launches and sales of Real Estate sector between FY22 and FY25 would help drive volume growth for SOMC over FY26–28E as these projects near completion, 4) EBITDA margin expansion of ~347bps over FY25–28E. We forecast SOMC EBITDA/EPS CAGR of 23/48% over FY25–28E on the basis of our volume/realisation CAGR assumption of 9%/0.4% over the same period.
Outlook
We do a sanity check of our PEG ratio-based TP using implied EV/EBITDA, P/BV and P/E multiples. On our TP of INR 635, FY27E implied EVEBITDA/PB/PE multiples are 7.8x/2.6x/17.4x all of which are reasonable in our view.
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