SOMANY CERAMICS LTD

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

In near future we can also pick up 26 or 51% stake in one or two tile manufacturing units in Gujarat, Trivedi said

Press Trust of India / Ahmedabad Aug 23, 2012, 18:55 IST

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

Company is set to add 3-4 mn meters capacity through acquisitions

BS Reporter / Ahmedabad Sep 12, 2012, 10:40 IST

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.

Scripcode : 531548 Company : SOMANY CERAMICS LTD.

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.