Buy Somany Ceramics; target of Rs 939: ICICI Securities

ICICI Securities research report on Somany Ceramics

Somany Ceramics (SOMC) reported Q1FY24 consolidated revenue growth of 4.9% YoY driven by tile vol growth of 8.1% YoY (4-year CAGR of 6.7%), while tile realisation declined 2.2 % YoY (flat QoQ). Consol EBITDA margin increased 59bps YoY (-35bps QoQ) to 8.6% primarily due to lower RM costs (down 97bps YoY, including power and fuel cost), resulting in EBITDA growth of 12.6% YoY while APAT declined 4.4% YoY (due to higher interest cost). Management stated demand conditions were subdued in Q1FY24, but there is significant improvement in July’23. It has guided for doubledigit vol growth in FY24 with EBITDA margin of 9.5-10% (due to lower gas prices and operating leverage).

Outlook

We tweak PAT estimates by ~1% for FY24E/FY25E and maintain BUY with a rolled-over Sep’24E TP of INR 939 (earlier: INR 896).