ICICI Direct has given Buy recommendation for Somany Ceramics with a target price of Rs. 780 in its research report issued on May 20, 2022
ICICI Direct’s research report on Somany Ceramics
Somany Ceramics (SCL) is the second largest tiles manufacturers in the domestic tiles market having ~63 MSM capacity (as of Q4) and sanitaryware, faucets capacity of 1.15 million (mn) pieces, 0.65 mn pieces respectively. SCL’s new capacity of 11 MSM (potential to generate ~Rs 250-300 crore worth of additional revenue (at full capacity) to be operational from Q1FY23.
Outlook
Post steep correction (~36% in the last 3 months), we believe gas price uncertainty is largely built in. Thus, we maintain BUY. We value SCL at Rs 780/share at 22x FY24 P/E (vs. Rs 1000 at 26x, earlier) amid gas price uncertainty and as we cut margins estimates.