Summary
Somany Ceramics Limited - Q3 FY 2025-26 Earnings Call Summary Wednesday, January 28, 2026 16:00 PM
Event Participants
Executives 4 Abhishek Somany (MD & CEO), Ameya Somany (DGM), Sailesh Raj Kedawat (CFO), Shrivatsa Somany (Head Bathware)
Analysts 5 Keshav Bijarathan Lahoti (HDFC Securities), Luv Gupta (Counter Cyclical Investments), Navin Agrawal (SKP Securities), Nilesh Sharma (Anantnath Skycon), Rahul Agarwal (Ikigai Asset), Sneha Talreja (Nuvama)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue (Consolidated) | ₹677 crores | +6% YoY, driven by 3.6% growth in tiles and 35% growth in adhesive/waterproofing. |
| EBITDA | ₹62 crores | +16% YoY; improvement of 80 bps in margins to 9.2%. |
| PAT | ₹18 crores | +100% YoY; significant improvement from ₹9 crores in Q3 FY25. |
| Sales Mix (Tiles) | 83.5% | Shifted from 85.3% YoY as non-tile segments (Bathware/Adhesives) grew faster. |
| Product Mix (GVT) | 42% | Improved from 38% YoY; reflects strategic focus on value-added segments. |
| Capacity Utilization | 80% | -500 bps YoY from 85%, but +400 bps QoQ from 76%. |
| Net Debt | ₹231 crores | Reduced from ₹288 crores at start of FY; includes ₹121 crores term loan. |
| Ad Spend | 2% of Sales | Reduced from 2.5% target due to termination of brand association with Salman Khan. |
| Working Capital | 14 days | Increased by 3 days compared to FY25 (11 days). |
Geographic & Segment Commentary
- Tiles Segment: Domestic demand saw gradual improvement due to reduced oversupply from Morbi as exports reached ~₹19,000-19,500 crores. Sales grew 3.6% YoY with a strategic shift toward GVT (42% of mix) and efforts to reduce discounting as market walk-ins improve.
- Bathware & Adhesives: Bathware saw ~12.5% growth while adhesives/waterproofing surged 35% YoY. The company is implementing a substantial price hike in bath fittings effective February 1st to offset a ~22-23% rise in brass costs since April.
- Somany Max (JV): Plant is stabilizing with Q3 losses reducing to ₹6 crores from ₹7.5 crores in previous quarters. Management expects production to ramp up in Feb-March, significantly reducing losses in FY27.
Company-Specific & Strategic Commentary
- Distribution Strategy: Added 170 net dealers in 9 months (Total: 3,050) and reached 530 showrooms. Focus remains on “bundling” where 25% of tile counters now stock bathware, leveraging legacy dealer relationships.
- Cost Optimization: Depreciation increased by ₹5 crores this quarter (run rate ₹26-27 Cr) due to revised asset life assessments. Gas strategy involves a basket of Henry Hub, RasGas, and JCC to insulate against spikes, with average gas cost at ₹44/SCM.
- Operational Shift: Reduced depot count from 19 (pre-GST) to 4, moving toward a direct factory-to-dealer model to improve logistics efficiency.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | Decent single-digit | Maintained for FY26; based on improved domestic walk-ins and project offtake. |
| EBITDA Margin | +100 to 150 bps | Improvement expected in Q4 FY26 over Q3 levels (~10.2% - 10.7% range). |
| Debt Reduction | ₹50 crores by FY28 | Term loans to be paid down sequentially; working capital debt to persist at ₹100-150 crores. |
| Somany Max Loss | <₹10 crores (FY27) | Down from ~₹26-27 crores in FY26; target to reach profit in FY28. |
Risks & Constraints
| Risk | Context |
|---|---|
| Raw Material Inflation | Brass prices for bath fittings rose from ₹570 to ₹770/kg (+23%); margins depend on the success of the Feb 1st price pass-through. |
| Utilization Lag | While QoQ utilization improved, YoY levels remain lower at 80%, impacting fixed cost absorption, particularly at the Max JV plant. |
| Competitive Pricing | Management noted that tile price increases are difficult; growth depends on controlling discounts rather than base price hikes. |
Q&A Highlights
Market Demand & Projects
- Question: What is the mix between retail and projects? (Sneha Talreja)
- Answer: Retail is currently 77-78%. Management expects this to shift to 75% as private and government project offtake increases over the next year (Abhishek Somany).
Somany Max Turnaround
- Question: When will the Max plant breakeven? (Nilesh Sharma)
- Answer: Expect loss reduction from ₹26Cr to <₹10Cr in FY27. Full profitability is targeted for FY28 as capacity utilization stabilizes (Abhishek Somany).
Fuel Costs & Mix
- Question: How are you managing the spike in Henry Hub prices? (Rahul Agarwal)
- Answer: GAIL baskets multiple sources (Henry Hub, RasGas, JCC, HPHT). Spikes in one are offset by others; Q3 average gas price was ₹44/SCM and Q4 is estimated at ₹42.5-43/SCM (Abhishek Somany).
Bathware Margin Pressure
- Question: Why are you taking a price hike in bath fittings now? (Rahul Agarwal)
- Answer: Brass costs rose 23% since April. Industry leaders recently hiked prices, allowing Somany to follow suit on Feb 1st (Shrivatsa Somany/Abhishek Somany).
Distribution Efficiency
- Question: How do you measure dealer efficiency? (Ritesh Shah)
- Answer: Metrics include net additions to “Platinum/Gold Clubs,” sales contribution from new dealers, and growth of exclusive outlets vs. legacy dealers (Abhishek Somany).
Key Takeaway
Somany Ceramics delivered a resilient Q3 FY26, characterized by a 6% revenue growth and a doubling of PAT to ₹18 crores. The performance was supported by a 16% YoY increase in EBITDA, driven by a 2.2% gross margin improvement and a strategic shift toward high-margin GVT tiles (42% of mix). While tile growth remained modest at 3.6%, non-tile segments like adhesives (35% growth) showed strong momentum. Management is focusing on stabilizing the Somany Max JV, which is expected to reduce losses significantly in FY27, and remains debt-focused, targeting a reduction in outside debt to ₹50 crores by FY28. Looking ahead, the company guided for a 100-150 bps EBITDA margin expansion in Q4 FY26, underpinned by stable gas prices and improved capacity utilization. Somany remains well-positioned to benefit from the domestic demand recovery and reduced Morbi oversupply, targeting improved realizations through better product mix and disciplined discounting.
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