Somany Ceramics Initiating Coverage Report By ICICI-Direct

Somany Ceramics (Somany) emerged as the third largest tiles player in the Indian tiles industry. It witnessed 23.3% CAGR in topline in FY10-14 (industry average: 16.6%) through aggressive capacity expansion from 16.7 msm in FY10 to 42.5 msm currently largely through a JV model. Going ahead, we remain positive on Somany’s growth prospects considering the structural shift in the industry post the Morbi development, its aggressive expansion plans and shift towards JV model. Consequently, we expect Somany’s earnings to grow at 44.4% CAGR in FY14-17E without any significant incremental capex resulting in an improvement in return ratios. Hence, we initiate coverage on Somany with a BUY rating with a target price of | 426 (19x FY17 EPS).

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