Somany Ceramics: ICICI Securities Issues Strong BUY Recommendation with INR 604 Target!

ICICI Securities has released a research report on Somany Ceramics, maintaining a 'BUY' recommendation with an unchanged target price of INR 604. The company's Q2 FY26 performance showed a consolidated revenue growth of 2.8% year-on-year, which fell short of ICICI Securities' estimates. Tile volume remained flat compared to the previous year, contributing to a subdued 6-year Compound Annual Growth Rate (CAGR) of 6%. The consolidated Operating Profit Margin (OPM) saw a decline of 59 basis points year-on-year to 7.8%, primarily driven by a 172 basis points drop in gross margin (including power and fuel costs). This resulted in a 4.4% year-on-year decrease in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).

Management attributed the weaker performance to subdued demand conditions in Q2 FY26, further exacerbated by heavy rainfall in North India. For the full fiscal year 2026 (FY26), the company has guided for mid-to-high single-digit tile volume growth. It also expects its OPM to expand by 100–150 basis points over the FY25 OPM, supported by anticipated improvements in operating leverage and better capacity utilization.

Despite the mixed Q2 results, ICICI Securities has tweaked its FY26–27E EBITDA estimates by approximately 4.8% and 1.6%, respectively. The 'BUY' rating and INR 604 target price are based on reasonable valuations.

Impact: This research report could positively influence investor sentiment towards Somany Ceramics, potentially leading to increased buying interest and a stock price movement towards the INR 604 target. The sector outlook mentioned by the management also affects investor perception of the broader tile industry. Rating: 8/10

Difficult terms: * **Consol. revenue**: Consolidated revenue, which includes the revenue from the parent company and all its subsidiaries. * **Q2FY26**: The second quarter of the financial year 2026, typically covering July to September 2025. * **vs I-sec estimates**: Compared to the expectations or predictions made by ICICI Securities. * **YoY**: Year-on-year, comparing the current period's performance with the same period in the previous year. * **Tile volume flat YoY**: The number of tiles sold remained the same in Q2FY26 as in Q2FY25. * **6-year CAGR of 6%**: Compound Annual Growth Rate over six years, indicating the average annual growth rate of tile volume over that period was 6%. * **Consol. OPM**: Consolidated Operating Profit Margin, a measure of profitability from core business operations. * **bps**: Basis points, where 100 basis points equal 1%. * **QoQ**: Quarter-on-quarter, comparing the current quarter's performance with the previous quarter. * **Gross margin**: The difference between revenue and the cost of goods sold (excluding operating expenses). * **EBITDA**: Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of a company's operating performance. * **Subdued demand**: Lower than usual customer demand for products. * **Mid to-high single-digit tile volume growth**: Expected growth in tile sales between 4% and 9% per year. * **FY26**: The financial year 2026, typically April 2025 to March 2026. * **FY25 OPM**: Operating Profit Margin for the financial year 2025. * **Operating leverage**: A measure of how a company's operating costs change with its revenue. Higher operating leverage means costs don't increase proportionally with revenue, boosting profits faster. * **Capacity utilisation**: The extent to which a company's production capacity is being used. * **FY26–27E EBIDTA**: Estimated EBITDA for the financial years 2026 and 2027. * **BUY**: A recommendation to purchase a stock. * **Rolled-over unchanged Sep’26E TP of INR 604**: The target price (TP) remains INR 604, based on September 2026 estimates, and this valuation horizon has been carried forward.