Q1 2027 Somany Ceramics Ltd Earnings Call Transcript
Key Points
- EBITDA margin improved significantly to 11.6% from 8% in the prior year, driven by higher capacity utilization (83% vs 72%) and better JV performance.
- JV losses turned into a profit of INR3 crore in Q1 FY27, compared to a loss of INR10 crore in the same quarter last year, with expectations of further improvement.
- Successfully passed on gas price increases to customers, with price hikes of 16-18% implemented in the quarter.
- Working capital days reduced from 17 to 12 days, with improved debtor, inventory, and creditor days, and a significant reduction in stock levels.
- Announced a new 9 million square meter plant in South India with a potential revenue of INR350 crore, along with debottlenecking initiatives to add 4-5 million square meters of capacity by Q4 FY27.
- Bathware, sanitaryware, and building materials divisions are growing healthily, with construction chemical capacity expansions in South and North expected to contribute from Q2/Q3.
- Management is confident of maintaining or improving EBITDA margins, targeting 12% or more, driven by operational efficiencies and JV profitability.
- Demand remains robust, with mid-single-digit volume growth expected, and the company is bullish on future outlook.
- Sales volume growth was only 3% in Q1 due to the shutdown of Morbi operations in April, which impacted supply of certain products.
- Morbi exports have declined by 50-60% from peak levels due to geopolitical issues, which is expected to continue for the near term.
- Gas prices remain volatile and have been increasing monthly, with July and August prices marginally higher than May and June, posing a risk to margins if not fully passed on.
- Channel inventory is lean as dealers are cautious about stocking due to gas price volatility, which could impact near-term sales.
- The company's market cap is significantly lower than historical valuations, with a negative 5% CAGR over the last five years, despite brand building efforts.
- Somany Max (a subsidiary) is still loss-making, with a loss of INR1 crore in Q1, though improved from a INR7 crore loss last year.
- The company's EBITDA margin (11.6%) is still well below the industry leader's 18-19%, indicating a competitive gap.
- Capacity utilization was impacted in April due to gas restrictions and maintenance shutdowns, limiting production in some lines.
Good afternoon, ladies and gentlemen. Welcome to Somany Ceramics Limited Q1 FY27 earnings conference call. (Operator Instructions) Please note that this conference is being recorded.
I now hand the conference over to Mr. Navin Agarwal, Head, Institutional Equities at SKP Securities Limited. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. It's my pleasure to welcome you on behalf of Somany Ceramics and SKP Securities to this financial results conference call. We have with us Mr. Abhishek Somany, MD and CEO; Mr. Shrivatsa Somany, Head, Bathware; Mr. Ameya Somany, DGM; and Mr. Sailesh Raj Kedawat, CFO. We'll have the opening remarks from Mr. Somany followed by a Q&A session.
Thank you, and over to you, Mr. Somany.
Yes. Good afternoon, ladies and gentlemen. Welcome to the earnings call of FY '26-'27 Q1. As you can see, our
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