Somany Ceramics shares rose 17.37 per cent to hit a high of Rs 729 on NSE. With this, the smallcap stock has erased its entire 2024 losses.
While demand is muted, Somany is confident of outgrowing the industry, and expects low double-digit volume growth with improved Ebitda margin.
Shares of tiles maker Somany Ceramics Ltd rallied 17 per cent in Thursday’s trade following the company’s better-than-expected March quarter results. Lower-than-expected ‘other expenses’ led to Ebidta beat. Analysts noted that Somany remains hopeful of recovery from 2QFY25 and has guided for low double digit volume growth in FY25, with 100-150bps improvement in
operating margins, assuming stable gas prices. For now, anlaysts are positive on the stock.
Somany Ceramics shares rose 17.37 per cent to hit a high of Rs 729 on NSE. With this, the smallcap stock has erased its entire 2024 losses. JM Financial said the demand for tiles remained sluggish through Q4 and further impacted in 1QFY25 on seasonality.
Blended gas cost was down 6 per cent YoY at Rs 47/scm while lower other expenses and employee cost led to Ebitda margin expansion of 180 basis points YoY to 10.8 per cent, which was 40 bps above JM Financial’s estimate.
“We broadly maintain our FY25-26EPS estimates to arrive at Mar’25 TP of Rs 950, basis 22 times March 2026 EPS. Maintain BUY on attractive valuations,” it said.
Despite weak demand, Somany Ceramics strengthened its working capital, improved cash flows and pared debt.
“While demand is muted, Somany is confident of outgrowing the industry, and expects low double-digit volume growth (versus industry’s 5–6%) with improved Ebitda margin. However, given current muted demand, we are trimming FY25E/26E EPS by 4 per cent/6 per cent. The company improved its balance sheet significantly during the fiscal. We retain “BUY” with a revised target of Rs 914 (earlier Rs 907) following a rollover to FY26E at unchanged 20x PE,” said Nuvama.
Somany Ceramics delivered superior performance compared with its peers, said Arihant Capital Markets. The tiles industry is expected to grow at 5 per cent. In long run, margins should normalise at 11 per cent, it said.
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