Fundamental analysis of Somany Ceramics

Podcast Duration: 6:39
SCL on the growth path Voice over: Hello doston, Angel Broking ke ek aur fundamental analysis special podcast mein aapka swagat hai. Doston, jaise ki aap jaante hai ke we at Angel Broking are running a series where we select a few impressive stocks and look closely at their fundamentals. Issi series mein aaj hum deeply analyse karenge Somany Ceramics Limited ko. Let’s start by discussing what the company stands for, as in unka business kya hain- Somany Ceramics Limited is a 49-year-old company that currently dominates the organised Indian interior decor and tiles industry. SCL ke paas ek extensive product portfolio hai jisme ceramic tiles, floor tiles, polished vitrified tiles, digital tiles, wall tiles, wall claddings, sanitary ware, bathroom fittings auur aise kai products hai. Phew! Product inventory hi bolte-bolte thak gaya yaar! Somany Ceramics had a wonderful fourth quarter in FY21. SCL ne 564 crore ka turnover register kiya Q4FY21 mein which is a 58% rise compared to Q4FY20 sales. Quarter on quarter basis pe dekhe yaane ke Q4FY21 ko Q3FY21 se compare karein to SCL ki sales 15% se badhi hai. Agar poore financial year ko compare karein yaane FY21 ke sales ko FY20 ke sales se compare karein to sales mein badhat sirf 2.5% ki aayi hai. Yeh rise dekhne mein chhota lag raha hoga aapko doston par yeh bhi yaad rakhiye ke FY21 ki sales lockdown ki vajah se kharab hue the. Despite the lockdown, company ne sales mein ek chhoti badhat dikhai hai. Agar lockdown na hota, toh sales kai zyaada ho sakti thi. Going forward, market experts SCL pe bullish hai kyunki woh expect kar rahein ke SCL will benefit as consumer behaviour is shifting from buying from the unorganised sector to the organised sector. Iska matlab yeh hai ke aaj ke din mein jab koi tiles ya bathroom fittings lagane ki sochta hai toh woh ab branded products ki taraf jyada dhyan deta hai instead of buying from local markets. Currently, the decor market is split in a 60-40 ratio. 60% is dominated by unorganised players and 40% is dominated by organised players. Management ka kehna hai FY22 ka first quarter yaane April se June ke quarter sales thodi lacklustre rahegi but overall for FY22, management ka kehna hai ke lockdowns khatam hote hi market mein phir se positive buying sentiments return karenge aur tile sales 13-15% tak badh sakti hai. Management ka yeh bhi kehna hai ke FY23 will turn out to be a better year because of capacity expansion that the company is undertaking at three tile plants. Yeh capacity expansion complete hoga by the end of FY22. Aaiye doston, ek baar margins ki taraf nazar ghoomate hai! In the quarter ending June, the company’s operating margin surged by 12 percentage points to 15.9%. Operating margin is the profit a company makes after accounting for wages and raw materials but before paying interest or tax. Company ka EBITDA yaane earnings before interest, taxes, depreciation and amortisation 6.5 (saade chhe) guna badha hai auur SCL ki pre-tax earning Rs 67.4 crore thi Q4FY21 mein compared to a loss of Rs 10.8 crore in Q4FY20. Market experts are also enthusiastic about the net debt reduction in the company which has gone down on a standalone basis to Rs 56 crore from Rs 242 crore a year earlier and on a consolidated basis to Rs 172 crore from Rs 444 crore a year earlier. Company ke network ki taraf dekhte hain- Company ne FY21 mein apna network bhi badhaya hai by adding 400 new dealers. SCL commands strong brand loyalty and has a very high brand recall value. Market experts expect kar rahe hai ke over FY21-23 SCL will report a strong net profit because of a strong distribution network and rise in operating margins. Doston, figures ki baat kaafi hui, ab dekhte hai SCL ki shareholding ko. In the quarter ending June this year, FII/FPIs increased their holding in the company from 2.65% to 3.48% and the total number of FII/FPI investors went up from 48 to 68. Promoter holding remained unchanged in the June quarter at 54.77%. Mutual fund holdings in the company are currently at 16.1%. India’s bath, tiles and sanitary market is expected to touch $ 10,000 million by FY23. Iss scenario mein, SCL is perfectly placed to benefit from its prime position as a dominant player in the organised market. Jis tarah se Indian customers brand-conscious ho rahe hai, market experts suggest that the unorganised markets will further come down in terms of their market control and Somany Ceramics can exploit that market opportunity. Saath-saath, SCL ki expanded capacity and strong distribution network will help it in reaching deeply into Tier 2 and tier 3 areas in India. Doston, SCL is currently trading at Rs 663 per share. Lockdown ki vajah se company aur uske share ko thoda nuksaan zaroor hua tha but the company has strong growth potential. Its share was trading at Rs 87 in March 2020 but has come a very, very long distance since then. Investors ka iss shares ke liye enthusiasm is quite apparent. After its price crash in March 2020, the company’s share immediately recovered and was trading at Rs 200 in the first week of October. By February beginning of 2021, it was already trading at Rs 400. While many investors have earned good returns from this share, one is advised to do his/her own due -diligence. Chaliye doston, aaj ke liye bas itna hi. Jaane se pehle, ek baat yaad rakhiyega ke stock market investing mein risk hamesha rahega. This podcast has been made for educational purposes only and the investor must do his own research as well. Aise aur interesting podcasts sunne ke liye humein follow karein via youtube and other social media channels. Until then goodbye and happy investing! Investments in the securities markets are subject to market risks. Read all the related documents carefully before investing.