Buy Somany Ceramics, target price Rs 950: HDFC Securities

HDFC Securities has buy call on Somany Ceramics with a target price of Rs 950. The current market price of Somany Ceramics is Rs 528.75. Time period given by analyst is one year when Somany Ceramics Ltd. price can reach defined target.

Somany Ceramics Ltd., incorporated in the year 1968, is a Small Cap company (having a market cap of Rs 2244.12 Crore) operating in Building Materials sector.

Somany Ceramics Ltd. key Products/Revenue Segments include Ceramic Floor & Wall Tiles, Other Operating Revenue and Scrap for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 618.24 Crore, up 4.47 % from last quarter Total Income of Rs 591.79 Crore and up 8.81 % from last year same quarter Total Income of Rs 568.20 Crore. Company reported net profit after tax of Rs 20.56 Crore in latest quarter.

Investment Rationale
The brokerage maintains BUY on Somany Ceramics with a revised target price of INR 950/share (13x Mar-24E consolidated EBITDA). It continues to like SOMC for its strong retail distribution, improving product mix, and tightened working capital (WC). With the recent capacity expansion of ~20% in Q1FY23, the brokerage expects SOMC to continue industry leading volume growth. While Q4FY22 consolidated revenue rose 9% YoY, EBIDTA/APAT declined by 43%/ 65% YoY on op-lev loss and elevated gas prices. Balance sheet continues to firm up, as Somany’s cash conversion cycle fell to 50 days, the lowest in past seven years

Promoter/FII Holdings
Promoters held 54.78 per cent stake in the company as of 31-Mar-2022, while FIIs owned 2.51 per cent, DIIs 20.2 per cent.