Somany Ceramics stock climbs over 17% as brokerages lift target price following strong Q4 earnings

Somany Ceramics, a prominent tile manufacturer in India, witnessed a remarkable surge of 17.4% in its shares during today’s intraday trading session, reaching ₹729 per share.

This significant increase comes on the back of the company's outstanding performance in the quarter ending March and for the entire fiscal year (FY24), despite facing challenges such as subdued domestic demand and reduced exports due to global factors.

The company on Wednesday reported a 9% YoY jump in its consolidated revenue from operations at ₹738 crore. However, the operating profit jumped 30% YoY to ₹79 crore, while the operating profit margin improved by 190 bps YoY and 210 bps on an annual basis, taking it to 11% in Q4. 

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This improvement can be attributed primarily to stable input costs and ongoing efforts at cost optimisation. The power and fuel costs for the reporting quarter totaled ₹139 crore, down from ₹154 crore in the corresponding period last year. It reported a consolidated net profit of ₹34 crore in Q4FY24 as compared a net profit of ₹24 crore in Q3FY23. 

For the full fiscal year (FY24), the company recorded a consolidated revenue from operations of ₹2,591 crore, marking a 4.51% YoY increase. Furthermore, the net profit rose to ₹99 crore from ₹67 crore in FY23, representing a 47.76% YoY growth.

The company expresses optimism regarding the future, foreseeing a positive shift in the domestic demand landscape in the coming years, particularly in the second half of the current fiscal year. 

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This optimism is based on several factors, including the expected rebound in domestic demand driven by new construction projects, the projected growth acceleration in the real estate sector, and the sustained momentum in exports, which are anticipated to bolster the Indian tile industry further.

Following the company’s financial performance, domestic brokerage firm Systematix Institutional Equities upgraded the rating on the stock to ‘buy’ and also revised its target price higher to ₹883 apiece from an earlier target price of ₹672 apiece. 

Similarly, Nuvama Institutional Equities has also raised its target price on the stock to ₹914 apiece from the previous target of ₹907. 

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“Over the last few quarters, despite a challenging demand scenario, SOMC has been continuously working on improving balance sheet strength and has bought down working capital days to merely 8 days from 31 in FY23. Furthermore, the company reduced debt by ₹1.5 billion YoY and improved cash flows significantly to ₹3.9 billion in FY24 from ₹1.6 billion in FY23,” the brokerage said.

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