Yet the market’s verdict is at odds with broker opinion. Of the 21 brokerage firms tracking Somany Ceramics, 19 recommend ‘buy’, ‘add’ or ‘accumulate’, while only two suggest a ‘hold’, according to Bloomberg data.
The divergence reflects a stock caught between near-term execution challenges and a broker consensus betting on a multi-year turnaround. Analysts argue that Somany’s underperformance stems less from structural weakness and more from plant-level losses and margin pressures that they expect to ease. The optimism, however, rest on a timely recovery at a single, still loss-making facility—and on a demand rebound that remains uncertain.
What went wrong
The stock’s sharp decline reflects both operational and sector-specific challenges.
Somany’s slower volume growth relative to Kajaria Ceramics, coupled with a wide margin gap driven by differences in sales mix, has weighed heavily on performance, said Udit Gajiwala, lead analyst at YES Securities. Kajaria’s sharper focus on cost rationalization has further widened the margin gap between the two players, he added.
Beyond the slower-than-expected demand recovery, losses at Somany’s Max plant have been a major drag, said Keshav Lahoti, equity research analyst at HDFC Securities.
Commissioned in January 2024, the Somany Max plant manufactures large-format tiles, has a revenue potential of around ₹2.5 billion and caters largely to institutional customers. Capacity utilization stood at about 50% in Q2FY26, well below the roughly 75% level analysts say is needed for breakeven.
“Management anticipates a FY26 PBT (profit before tax) loss at the Max plant, akin to FY25’s ₹260 million, but expects breakeven within 18 months as the plant ramps up, supported by investments in a new press to boost margins,” Lahoti said.
With the Max plant still loss-making, analysts say its turnaround is crucial to unlocking shareholder value.
The facility, which focuses on value-added products, is expected to break even at around 75% utilization by Q4FY26 and turn profitable by FY28, according to a Nuvama Institutional Equities report dated 8 January.
Balance sheet comfort
Despite demand challenges, analysts point to improving balance-sheet metrics.
Volumes were flat year-on-year in Q2 FY26, yet net working capital days remained low at just 14 days, the Nuvama report noted. The company has consolidated subsidiaries, deployed capital efficiently and reduced debt to about ₹300 million, with repayments expected over the next two to two-and-a-half years.
“Furthermore, the company remains focused on increasing its profitability rather than just pushing volumes, thereby accelerating cash flows,” the Nuvama report said.
Free cash flow, which fell to ₹578 million in FY25 from ₹2.4 billion in FY24, is expected to recover strongly as most of the capex cycle is now behind the company, it added. Nuvama maintained its ‘buy’ rating and raised its target price to ₹662 from ₹633.
Sector headwinds
Still, risks persist.
Lahoti flagged risks from unorganised tile manufacturers in Morbi, who have disrupted the industry by flooding the domestic market with low-priced products. Geopolitical tensions and tariff uncertainties could also keep Indian tile exports volatile.
Even so, he maintains an ‘add’ rating on Somany with a target price of ₹490, citing the company’s push towards premiumization.
“The company will launch a new premium-segment brand within the next three months to elevate its premium sales mix,” he said.
Margin levers
Somany has also cut channel incentives and plans further reductions as demand improves, which should aid margins, said Lahoti.
Price hikes could provide another boost.
“Price hikes have been retained. We have been able to retain the price hike. In fact, we’re looking—if demand picks up, we’ll probably take another price hike in this quarter or maybe early next quarter,” managing director and chief executive officer Abhishek Somany said during an analyst call on 7 November.
After the company’s recent analyst meet, JM Financial Institutional Securities said in a 12 January report that Somany is targeting Ebitda margins of over 10% in the near term, from about 8% in the first half of FY26. Margins could rise further to 12–14% over the next two years, driven by a richer value-added mix.
Somany’s consolidated Ebitda margin stood at 7.9% in Q2 FY26, down from 8.5% a year earlier.
Valuation gap
At current levels, valuations appear less demanding.
Somany trades at a trailing price-to-earnings multiple of 27.15, with its one-year forward multiple at 20.9 times, according to Bloomberg. Kajaria Ceramics, by comparison, trades at a much richer 46.28 times.
Nuvama estimates that Somany is valued at just 11 times FY28 earnings.
“We believe the stock’s current valuation is at a sharp discount to other building material peers despite a relatively stable performance and growth outlook,” Antique Stock Broking said in a 1 January report. It maintained a ‘buy’ rating but trimmed its target price to ₹590 from ₹680, citing risks from weak demand and excess Morbi capacity being diverted domestically.
According to YES Securities’ Gajiwala, sustained volume growth alongside double-digit margins would be the key trigger for a re-rating.
Investors should also track export momentum, which could ease domestic pricing pressure, he said. Higher volumes would improve operating leverage and margins—critical for a meaningful recovery in the stock.
