Highest Upside

We maintain BUY on Kajaria while raising our TP by ~7% to Rs1,550 (from Rs1,450). The company has delivered superior profitability with EBITDA margins significantly expanding by 450bps YoY/110bps QoQ in Q2FY26.

Somany Ceramics (SOMC) reported Q1FY26 consol. revenue growth of 4.5% YoY with tile volume rising 3% YoY (6-year CAGR of 5.1%) while tile realisation was largely flat YoY (+1.2% QoQ).

Cost rationalisation measures boost margins: We highlight the company has taken various measures including staff rationalisation, promoters forgoing salary, unification of sales and packaging re-engineering etc. to control cost, which has boosted operating margins. The company's cost optimization measures included the unification of sales and procurement functions for bulk purchasing, packaging re-engineering resulting in annual savings of 3035 crore, workforce rationalization, a hiring freeze, and stringent control over advertising expenditures. Management expects Profitability to improve on...

Somany Ceramics Ltd.'s (SCL) Q1FY26 result was broadly in-line with our estimates on key parameters. Market demand during Q1FY26 was impacted by lower sales in India. Exports also faced pressure in Q1 FY26. Further, sales of some low product mix items and old/deleted stock, which led to a reduction in realization, though a small price increase was implemented in July. The management guided that the focus is on innovation and better products to move up the value chain. New product launches are planned for September and after Diwali. Despite weak Q1, the management is not changing its guidance for...

Kajaria reported a moderate financial performance, impacted by a challenging market environment, with domestic demand remaining sluggish. However, the company is optimistic about future growth, driven by potential export improvements, slightly better domestic demand and government initiatives. The integration of its divisions and efforts to optimise costs are expected to yield benefits. Although the integration is expected to improve margins and increase volume growth, sluggish demand may still pose a risk to the realisation of these benefits. Considering these factors, we...