Why ICICI Securities is Bullish on Somany Ceramics

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Why ICICI Securities is Bullish on Somany Ceramics
Credit: © Reuters.

By Aditya Raghunath

Investing.com -- ICICI Securities Ltd (NS: ICCI ) has been tracking ceramic wall and floor tile manufacturer Somany Ceramics Ltd (NS: SOCE ) for quite some time now. The brokerage firm has consistently raised its target price on the company since September 2020 and Somany Ceramics has always hit the target.

ICICI Securities had given targets of Rs 290, Rs 304 and Rs 380 for Somany Ceramics and the tile company has crossed all of them. Its latest report gives Somany Ceramics a target of Rs 500, an upside of over 20% from its current trading price of Rs 414.

The brokerage firm has said, “Somany Ceramics' working capital management and net debt reduction (down from about Rs 444 crore in FY20 to Rs 255 crore as on Q3FY21) has been the key positive. Given the robust demand traction, improved margins trajectory and balance sheet repair initiatives, we raise our target multiple to 17x now (vs. 14x) as we roll forward to FY23E.”

The firm’s report on Somany Ceramics adds that “Tiles revenues were up 12.6% YoY at Rs 428.6 crore while bathware revenues were up 8.4% YoY at Rs 50.9 crore. Overall revenues were up 12.9% YoY at Rs 492 crore.”

With sales volumes recovering faster than expected, the stock is a good buy according to ICICI Securities. BOB Capital Markets has also given the stock a target of Rs 490.

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