Somany Ceramics's  (SCL) Q3FY21 result was in-line with our estimates on all key parameters. Despite subdued demand from metros, tier-III and smaller towns led to 11.8% YoY tiles volume growth for SCL. Further, better product mix in tiles and higher sales of bathware segment aided EBITDA margin expansion.

Net sales increased by 12.9% YoY to Rs 4,925 million, while EBITDA came in at Rs 633 million, up by 57.3% YoY. The company reported net profit of Rs 311 million, a robust growth of 148.5% over Q3FY20. The management sound confident to continue the growth momentum aided by retail demand in rural market, opening of urban markets, increasing share of GVT in total sales and strong traction in high margin bathware segment.

Commenting on the result review, IDBI Capital Markets & Securities said, "To factor in better than earlier anticipated growth outlook, we revise our net sales and PAT estimates by 17%/16%/14% and 38%/31%/28% over FY21E/FY22E/FY23E respectively. However, we believe that the stock is more than factoring all the positives. We downgrade the stock to Reduce (from Buy) with a revised TP of Rs 350 (earlier Rs 274) assigning 13x PER (unchanged) on FY23E."

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