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Home / Markets / Mark To Market /  Somany Ceramics stock up 4.5% on robust Q2 performance
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Tile maker Somany Ceramics Ltd has impressed the Street with its robust performance in the September quarter. Its revenue and profit growth of 10% and 57% on a year-on-year basis, was ahead of analysts' expectations. This beat was largely driven by operating leverage. 

Another postive takeaway for investors in this stock was tile volume growth of 25% compared to the same quarter last year. On a two-year CAGR basis, Somany's tile volume growth at around 13% was similar to that of close competitor Kajaria Ceramics Ltd, analysts said.

In a post earnings conference call, the company's management said that tile volume performance was strong aided by the reopening of key markets and improved demand new construction. The management also spoke about market share gains from companies in the unorganised sector. 

Going ahead, the company's management is optimistic on demand scenario and has guided for 12-13% volume growth in FY23 along with margin expansion of around 100-150 basis points (bps) y-o-y in FY23. One basis points is one hundredeth of a percentage point.

While volumes growth is likely to be robust, there is threat to margins from sharp inflation in gas prices. In the September quarter, Somany's gross margins contracted by 420bps sequentially. It should be noted that to tackle the cost pressure, the company has taken price hike of around 10% so far in this financial year. The company's management expected to announce further price increases depending on movement in gas prices. For every gas price hike of 1.5-2/sqm, the company takes a 5-6% price increase to mitigate the impact, said the management.

Meanwhile, the company's management said that its earlier announced capital expenditure of Rs180-190 crore is on track and should be commissioned in February-March of 2022.

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