 "Antique cuts Somany Ceramics target, earnings on slower volume growth")
Antique Stock Broking has cut its target price on Somany Ceramics Ltd. after trimming earnings estimates, citing lower volume growth and slower-than-expected margin recovery. The brokerage, however, maintained its 'Buy' rating, pointing to attractive valuations despite near-term demand challenges.
Following a meeting with senior management, Antique said Somany Ceramics has maintained its guidance of mid- to high-single-digit tile volume growth in the financial year 2026 (FY26), along with a 100-150 basis points year-on-year (Y-o-Y) expansion in Ebitda margins. Demand trends are improving in tier-two and tier-three cities, while metro and tier-one markets continue to remain subdued, the note said.
The brokerage noted that the Kassar plant issue has been fully resolved and operations are now running at optimal capacity, although some spillover impact could persist into the third quarter of FY26. Utilisation at the Max joint venture plant is expected to improve in the second half of FY26 and further in FY27, which should help reduce losses at the joint venture.
With most of the capital expenditure cycle now behind the company, management's focus has shifted towards improving utilisation of existing capacity and strengthening the balance sheet, Antique said. Over the next 12-18 months, management expects glazed vitrified tiles to contribute more than 50 per cent of volumes, supported by the Max plant, as demand shifts away from wall tiles.
Antique has cut its earnings per share estimates for the FY26, 27 and 28 by 2 per cent, 15 per cent and 12 per cent, respectively, factoring in lower volume growth and a slower margin recovery. The brokerage now assumes a volume and revenue compound annual growth rate of 7 per cent and 10 per cent, respectively, with a 190 basis points improvement in Ebitda margins over FY25 to 28.
Despite the revisions, Antique said the stock is trading at a sharp discount to other building material peers, including industry leader Kajaria Ceramics. It has assigned a target multiple of 20 times, a 38 per cent discount to Kajaria, and revised its target price to ₹590 from ₹680 earlier.
Key risks to the call include a prolonged slowdown in domestic demand and excess capacity in Morbi being diverted to the domestic market, leading to supply pressure, Antique said.
Shares of Somany Ceramics snapped a two-day losing streak to gain over 3 per cent on Thursday. The counter has risen 2 per cent in the last 12 months, compared to a 10.5 per cent advance in the benchmark Nifty 50. Somany Ceramics has a total market capitalisation of ₹1,691.37 crore. ==============
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