SOMC: Recovery expected in Q2; upgrade to BUY on cheap valuations. ECLX: Aggressive cost management saves the day

Somany Ceramics (SOMC) reported a dull Q1FY21 as consolidated revenue shrank 57% YoY to Rs 1.7bn, with tile volumes down 56% YoY.

Somany Ceramics (SOMC) reported in-line consolidated revenue growth of 2.5% YoY to Rs 4.4bn in Q3FY20, aided by a 4% uptick in tile volumes.

Building material companies under our coverage are expected to post a tepid Q3FY20 as market conditions remained challenging, thus taking a toll on volumes.

Somany Ceramics has informed the stock exchanges that a cheque of | 26.2 crore issued in favour of the company by its stock broker Mentor has bounced owing to insufficient funds. Somany has issued demand notices for repayment to Mentor as per requirements of the applicable law. In view of default by Mentor, Somany has filed a case against Mentor and its directors with Haryana Police. Non recovery of these funds could lead the...

Share of GVT in product portfolio rises to 22% in Q1FY20 Somany's sales volumes grew 8.0% YoY to 11.9 MSM despite several operational challenges faced by the company in Q1FY20: a) lower inventory offtake at dealers' level due to lower end-user demand amid liquidity squeeze in the economy; b) stricter credit control measures by the company that further impacted sales (| 25-30 crore impact); c) two JVs were shut in May, 2019 for refurbishment. The effect of all these trickled down to the overall operating performance of Somany that reported ~80% utilisation in...

Somany Ceramics (SOMC) reported in-line consolidated revenue growth of 3.9% YoY in Q1FY20 to Rs 3.95bn, as tile volumes grew 8% YoY.

Sector: Construction Material /Mid-Cap | Earnings Update 4QFY19 Background: Somany Ceramics Ltd (SCL) was incorporated in 1969, and is now the third largest organised tiles manufacturer in India. Company, currently has installed capacity of 51 MSM and through outsourcing model has access to 9 MSM of additional capacity. Company also has capacity to produce 1.8mn pcs of sanitary ware products. Company's has two own manufacturing plant in Kassar, Haryana (19.63 MSM) and Kadi, Gujarat (6.65MSM). Company's has seven subsidiaries / Associate plants located in Gujarat with a capacity of 29MSM. In FY18, SCL has sold 49.52 MSM and we have estimated total industry market share of ~6.3% (volume), while it has...

To increase share of GVT in product portfolio Somany's sales volumes grew 3.3% YoY to 51.2 MSM in Q4FY19 despite conscious credit monitoring. The 3.5 MSM Andhra GVT plant was commissioned in March, 2019 and is expected to reach 100% utilisation in Q2FY20E. Secondly, Somany is upgrading Kadi plant (| 30 crore capex) to augment manufacturing of value-added products and is expected to be operational by November, 2019. With new capacities being added and share of value-added products expected to increase, the management has guided...

Somany Ceramics (SOMC) reported a 4% YoY dip in Q4FY19 consolidated revenue to Rs 5.2bn with tile volumes falling 3.3%. Consolidated operating margins rose 210bps YoY to 13.6% due to higher gross margins (+198bps), aiding EBITDA/PBT growth of 13.4%/16.6% YoY. Management has guided for double-digit volume growth in tiles, with stronger margins in FY20. We trim...

EBITDA margin expanded 150 bps QoQ to 8.2% in Q3FY19 as the company took a price hike across product portfolio in Q3FY19 PAT grew 2x QoQ to | 9.2 crore (above our expectation of | 8.5 crore) mainly on account of higher-than-expected EBITDA margin Clocks 8.0% YoY volume growth in Q3FY19 Somany Ceramics' (Somany) sales volumes grew 8.0% YoY (6.2% QoQ) to 12.77 MSM in Q3FY19 despite credit control measures implemented by the company from Q1FY19. The Andhra Pradesh plant (3.9 MSM GVT...

We anticipate Somany's sales volumes will improve in H2FY19 as operational disruption such as trucker's strike, Kerala flood, software related issues & credit control measures are behind us. Additionally, 3.5 million square metre (msm) GVT capacity addition in Andhra Pradesh will further aid volume growth for the company from FY20E. We expect Somany's sales volume to grow 11.3% in FY20E. Furthermore, with the company taking price hikes across the product portfolio, an increase in share of value-added products, expected fall in gas prices & higher...

We met the management of Somany Ceramics. The key takeaways are: -i) the company is planning to increase its share of value added products in its product portfolio with commissioning of new 3.5 million sq mt (MSM) GVT capacity in Andhra Pradesh (expected to be commissioned in February, 2019), ii) gas prices could increase further in Q3FY19E from Q2FY19 level of | 40/SCM and start declining from Q4FY19E with the recent sharp fall in crude price, iv) to double faucet manufacturing facility...

Somany Ceramics' (Somany) sales volumes de-grew by 3.6% YoY to 12.0 million sq. meter (MSM) (our estimate: 13.6 MSM) Topline de-grew 9.0% YoY to | 392.8 crore (below our expectation of | 434.1 crore) on account of operational disruptions EBITDA margin contracted sharply by 520 bps YoY to 4.2% and was below our estimate of 5.9% mainly on account of higher raw material expenses & higher fuel costs amid higher natural gas prices PAT profit declined by 78.4% YoY to | 4.6 crore and was below our...

Sector: Construction Material /Mid-Cap | Earnings Update 1QFY19 Background: Somany Ceramics Ltd (SCL) was incorporated in 1969, and is now the third largest organised tiles manufacturer in India. Company, currently has installed capacity of 55.29 MSM and through outsourcing model has access to 9 MSM of additional capacity. Company also has capacity to produce 1.8mn pcs of sanitary ware products. Company's has two own manufacturing plant in Kassar, Haryana (19.63 MSM) and Kadi, Gujarat (6.65MSM). Company's has seven subsidiaries / Associate plants located in Gujarat with a capacity of 29MSM. In FY18, SCL has sold 49.52 MSM and we have estimated total industry market share of ~6.3% (volume), while it has...

EBITDA margin expanded 120 bps YoY to 6% but it was below our estimate of 8.5% due to higher-than-expected raw material costs (14.8% as percentage of sales in Q1FY19 vs. our estimate of 12.0%) and higher power & fuel cost amid higher natural gas prices PAT grew 39.4% YoY to | 8.4 crore, below our estimate of | 19.0 crore due to a lower-than-expected topline and EBITDA margins Macro environment & competition impact revenues Somany reported revenue growth of 8.6% YoY to | 362.2 crore. It was...

Higher Cost & Soft Realisation Impact Performance Led by dismal realisation and higher gas prices, Somany Ceramics continued to report soft performance in 1QFY19 mainly with its net revenue growing by a modest 10% YoY (-31% QoQ) on low base to Rs3.6bn. Whilst EBITDA surged by 49% YoY (-55% QoQ) to Rs196mn, EBITDA margin came in at just 5.4% (+144bps YoY and -284bps QoQ). Net profit stood at Rs84mn (+39% YoY and -64% QoQ). As per the Management, the Company lost revenue to the tune of ~Rs350mn due to credit control measures and plant shutdown in May'18. Remaining under pressure, blended realisation/sm fell by 3.6% YoY and 11.1% QoQ to Rs292/scm, which the Management...

ICICI Securities Ltd | Retail Equity Research Somany Ceramics' (Somany) sales volumes grew 2.3% YoY to 15.9 MSM (our estimate: 15.2 MSM) given the high base Somany reported a dismal topline performance as its revenue degrew 5.9% YoY to | 526.7 crore (our expectation: | 530.9 crore) The EBITDA margin contracted 20 bps YoY to 8.9% (our estimate: 7.4%) on account of higher other expenses (25.1% as a percentage of sales in Q4FY18 vs. 20.3% in Q4FY17) Net profit de-grew 6.0% YoY to | 23.5 crore (our expectation: | 21.8...