CPM 48.9
BUY
Somany Ceramics Limited (Somany)
incorporated in 1969 is part of the HL Somany group. It is one of the leading
players in the Indian tiles industry with a presence in both ceramic and
vitrified tiles. The company has manufacturing units in Gujarat and Haryana.
The company has a strong and an extensive distribution network comprising over
1,300 exclusive dealers, around 5,000 sub-dealers and 68 showrooms/display centers
across India to increase market penetration. It also has 20 depots spread
across India.
Outlook to remain healthy with
demand from the real estate sector and replacement demand but
low-cost Chinese imports a key concern .Demand to remain healthy from the real
estate sector, and replacement demand but the industry may face stiff
competition from cheap imports from China. Key concerns
• High dependence on real estate
sector
• Competition from low-cost
Chinese imports and unorganized sector
• Volatility in prices of raw
materials like Ukraine clay and soluble salts
Valuations
Somany is currently trading at
trailing P/E and EV/EBITDA multiples of 5.7x and 4.5x, re
Value-added products’ contribution on the
rise
Contribution from value added
products – VC, Duragres and digital tiles – increased significantly in the past
one year. The higher strength and abrasion resistant quality of VC and Duragres
tiles and the unique characteristic of digital tiles have raised the demand for
these tiles; hence their contribution to the consolidated top-line increased to
29% in Q1FY13 from ~17% in Q1FY12. We expect contribution from the value-added
tiles to increase further; this will lead to slight expansion in margin despite
rising cost pressures. Somany to focus on growth through inorganic route.
Somany has adopted the inorganic
route for expansion in the past one year, and is expected to follow a similar
strategy for future growth too. It acquired 26% stake in Vintage Tiles Pvt. Ltd
in October 2011 and a similar stake in Commander Vitrified Pvt. Ltd. in April
2012. With these acquisitions it got access to 5.2 mn sq.mt. Of capacity at a
capital outlay of ~Rs 190 mn (including debt); on the other hand, a Greenfield
expansion requires Rs ~1,200 mn. This strategy enables access to capacity at
lower capital requirements, and thus provides impetus to return ratios.
ON EXPANSION MODE-
Somany to invest up to Rs 200-cr in over two yrs on
expansion
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In near future we can also pick up 26 or 51% stake
in one or two tile manufacturing units in Gujarat, Trivedi said
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Press Trust of India / Ahmedabad Aug 23, 2012, 18:55
IST
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Tiles maker Somany Ceramics (SML), a flagship company
of H L Somany Group, today said it would invest Rs 150-200 crore over the next
two years on organic and inorganic growth in India.
The company having annual production of 19.5 million
square metres proposes to set up an ultra-modern tiles manufacturing plant in Karnataka,
and is looking to add 3-4 million sq metre capacities in Gujarat through the
acquisition route.
We shall invest Rs 150-200 crore on
expansion in India over the next two years. It includes our plan to set up a
modern plant at Tunkur in Karnataka having 36 mn sqm annual production
capacity, besides few acquisitions in Gujarat,"SMLCEOGGTriveditoldPTI.
"We have already acquired close to 85,000
sq metres of land in Karnataka for the proposed new facility in future,"
he said.
In near future we can also pick up 26 or 51%
stake in one or two tile manufacturing units in Gujarat, engaged in
manufacturingofvitrifiedandfloortiles, Trivedisaid.
"It would add up another 3-4 million sq
metres to our production capacity in Gujarat," he said.
The company has combined production of 5.5
million sq metres through its two joint ventures at Morbi, which is separate to
19.5 million sq metre annual production from its two plants, one each in
Gujarat and Haryana.
SML has set an ambitious target of achieving Rs
1,250 crore turnover in the current fiscal (2012-13). It closed with a turnover
of Rs 921 crore in last fiscal (2011-12), and reported Rs 25 crore net profit.
Somany to focus on south Indian market
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Company is set to add 3-4 mn meters capacity through
acquisitions
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BS Reporter / Ahmedabad Sep 12, 2012, 10:40 IST
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Tiles and sanitary ware major Somany Ceramics Ltd
(SCL) would be focusing on the south Indian market in the coming years. The
company already has two manufacturing units one each in Haryana and Gujarat.
Now, they have acquired 68,000 sq mt of land in
Karnataka, where they plan to set up a Greenfield plant in days to come.
Chairman and Managing Director of SCL Shreekant Somany said "In the coming
years our focus will be on the south India."
The company having annual production of 19.5 million sq mt besides proposing an
ultra-modern tiles manufacturing plant in Karnataka, is also looking to add 3-4
million sq mt capacity in Gujarat through the acquisition route.
Its target for this fiscal is increasing production to
30 million sq meter. This would through both the organic and inorganic route.
The company also plans to achieve turnover of Rs 1000 crore this fiscal.
Somany was also optimistic about the growth of the
tiles industry. "Though there is slow down in the real estate sector, new
construction are still being undertaken. Also, there is tremendous demand for
office and commercial space in the country. I expect 12%-15% average growth for
the tiles industry at least for the next 15 years," he added.
He further informed that the since urbanization will
increase in the future, so will the demand for tiles and ceramics.
The present sales of the company constitute 35% from
projects while 65% is from the retail business. "The figures reverse just
four years ago," Somany said, justifying his optimism for the ceramic
industry.
SCL, a flagship company of the H L Somany group has 87
store across the country and plans to add another 20-25 stores by the end of
this fiscal year. It has two manufacturing facility one in Kassar, Haryana and
other in Kadi, Gujarat. It has also taken up stake in two companies based in
Morbi, Rajkot.
Somany Ceramics Ltd has informed BSE that the Company has
launched a new product on July 23, 2012. The product namely 80X80cm glazed
vitrified tile is first of its kind in the Ceramics Industry in India. The
product was launched in the august gathering of more than 150 ceramics tile
dealers of the country.
These large format tiles are available into two variants to be manufactured
under the digital technology - the first one with the nano polish that gives a
super glossy finish to the tile surface and the other variant available under
the patented VC shield gives the tile a dazzling matt finish.
This latest innovation by the R & D team of Somany has given the tile
industry yet another advanced product in order to delight its customers.
