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ICICI Securities
Somany Ceramics (Hold)
CMP: ₹226.8
Target: ₹232
Somany Ceramics is a manufacturer and marketer of tiles and offers a range of sanitary ware and bath fittings. The company is engaged in manufacturing ceramic/ vitrified wall and floor tiles. It operates through ceramic tiles and allied products segment.
Somany Ceramics’ stock price has seen big correction over the past year due to: a) severe demand and pricing headwinds faced by the tile industry; b) company’s working capital indiscipline, and c) flaws in systems and processes leading to losses on account of employee fraud and broker default.
Maintain ‘hold’ with target price of ₹232: Recent initiatives undertaken by Somany Ceramics with respect to partial monetisation of ICDs (inter-corporate deposits) and its inclination to call off treasury operations and instead repay debt, is likely to augur well for the company by way of providing reassurance to investors. We expect Somany Ceramics’ revenue and profit after tax to grow at CAGR of 8.7 per cent and 19.4 per cent, respectively, over FY19-FY21E.
We maintain ‘hold’ with a revised target price of ₹232 (14x FY21E earnings) versus ₹182 (11xFY21E earnings) earlier.
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