Abhishek Somany, Joint MD of Somany Ceramics , said though the industry continues to remain buoyant, it is yet to see the pick up in momentum post elections.
"This industry has seen a decent uptake even in the bad years, the last two-three years. So we have been growing at about 12-13 percent as an industry," he said, adding that the company has been growing at about 24 percent compounded annual growth rate (CAGR) for the last six years, with last year being at about 20 percent.
Also Read: Growth momentum continues for Somany Ceramics: CRISIL
Somany Ceramics has seen an improvement in demand for its value-added products and is confident of achieving 19-20 percent growth ahead, said its Joint MD.
Below is the transcript of Abhishek Somany's interview with Nigel D'Souza and Reema Tendulkar on CNBC-TV18.
Reema: What kind of momentum are you seeing for your business led by incremental demand from housing construction and the shift towards organized segment?
A: If you are referring to the momentum which is there after the elections, that is yet to come. Other than that, the industry has been fairly buoyant considering that 31 percent of India has urbanised and this is only increasing. So every percent is a huge number of millions of people being urbanised. From that point of view, this industry has seen a good decent uptake even in the bad years, the last two-three years. So we have been growing at about 12-13 percent as an industry.
As a company, we have been beating those estimates and we have been growing at about 24 percent compounded annual growth rate (CAGR) for the last six years, last year being at about 20 percent. So the momentum is fairly good and I think the momentum what you are referring to from the expectation from the new government that would take probably another nine-eighteen months to start showing results on ground. The number of cities, which are planned, the number of highways, which are planned, so that is something which is yet to come. From an organised to unorganised point of view, the organised sector keeps getting more advantage because with the disposable income going up and the affiliation to a brand going up, from that point of view, the organised sector considering that more people want value added products is only going up. So the organised sector -- the proof of the pudding is the sector is about 21,000 crore and divided 50-50 between the organised and the unorganised -- within the organised, the top two-three players which contribute about 55 percent of this Rs 10,000 crore. So clearly the top two-three players have been growing at 23-24 percent CAGR.
Nigel: Analysts expect around 19-20 percent growth over the next couple of years. Do you think you will be able to achieve the same and also what is your expectation looking at the current market scenario in terms of volume growth as well as realisations?
A: I think the 19-20 percent growth going forward between 14 and 16 is a given. We would definitely achieve that with the current situation but if the government had to increase or give any boost to the housing sector, this could only improve. On the volume front, we have been growing 50-50 in terms of volumes, let us say if it is a 20 percent growth, we would grow on one-year maybe 10-12 percent on volume and the other year 10-12 percent on value. So I think it will be a fair 50-50 kind of a scenario. As far as the absolute volume is concerned, we currently have access to 44 million sq meters and we would go up to achieve this growth, to maintain this growth we would have to scale this up to between 55 million sq meters and 57 million sq meters, which we are ready to.
Reema: Since you are expecting things to improve, the demand to improve, would you be considering adding on to your capacity? We know you doubled your capacity from FY11 to FY14, but what about incremental capacities?
A: There are two kinds of capacities which are coming in. One is for the tile business which is 95 percent of our revenue and also for the sanitary ware business. For the tile, we have access to 45 million sq meters and to maintain the 20 percent growth year-on-year (Y-o-Y) or maybe better, we would have to keep adding 5-7 million sq meters every year. Therefore, up till 2016 we expect the capacity to be anywhere between 55 and 57 million sq meters.
In terms of sanitary ware, we are currently at 0.5 million pieces per annum and we are expanding this within the next 12 to 15 months to 1.5 million pieces per annum.
Somany Ceramics stock price
On June 16, 2014, Somany Ceramics closed at Rs 253.00, up Rs 0.40, or 0.16 percent. The 52-week high of the share was Rs 294.00 and the 52-week low was Rs 65.30.
The company's trailing 12-month (TTM) EPS was at Rs 7.22 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 35.04. The latest book value of the company is Rs 46.25 per share. At current value, the price-to-book value of the company is 5.47.
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