Somany Ceramics - Result Update - ICICI Direct

Somany Ceramics (Somany), like its key peer, reported resilient Q2FY21 reported numbers as organised tiles players exhibited stronger recovery back to pre-Covid volumes. The tiles sales volume was up 2.7% YoY at 12.9 MSM with realisations down 1.9% YoY, owing to sales mix. Overall revenues were up 0.4% YoY. EBITDA at Rs. 49.4 crore was up 10.4% YoY, (margins 11.7%, up 110 bps), largely driven by cost rationalisation initiatives (employee and other expenses down ~12% YoY) along with benign power & fuel expenses that was down 12% YoY due to lower gas prices. PAT was at Rs. 20.5 crore, up 2.2x YoY, with growth aided by superior operating performance, lower interest costs as well as some one-offs in base quarter.

Valuation & Outlook

Somany has become prudent with credit control measures aiding working capital management and debt reduction. Consolidated debt was down Rs. 84 crore in H1FY21 to Rs. 382 crore, driven by working capital optimisation. It will be important to monitor how the sales traction pick up from here coupled with cost rationalisation sustainability. Given the alluring valuations, improved margins trajectory and balance sheet repair initiatives, we upgrade to BUY recommendation (vs. HOLD, earlier) a revised target price of Rs. 290/share (14x FY22E EPS).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Somany_Q2FY21.pdf

Shares of SOMANY CERAMICS LTD. was last trading in BSE at Rs.257.65 as compared to the previous close of Rs. 252.3. The total number of shares traded during the day was 14629 in over 568 trades.

The stock hit an intraday high of Rs. 260.3 and intraday low of 249.3. The net turnover during the day was Rs. 3754822.

Source : Equity Bulls

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