Multibagger stock: Up 500% in 3 years! ICICI Securities bets on this smallcap stock for over 40% upside

Shares of Somany Ceramics have delivered multibagger returns to its investors as the stock has zoomed over 500 per cent in the last three years. The stock has also recovered over 42 per cent from its 52-week low of Rs 445.40, hit on December 23, 2022.

According to ICICI Securities, Somany Ceramics has near-term demand and margin tailwinds due to a pick-up in the domestic housing market and increased exports from Morbi (thus possibly lower domestic competition and pricing pressure) along with lower gas prices. The brokerage has maintained a 'Buy' rating with a target price of Rs 896, suggesting an upside potential of over 40 per cent.

"Management stated demand was subdued during Q4 and continues to be so in Q1FY24. However, it expects Somany to outpace industry growth in FY24 and has guided for mid-teens revenue growth and 12-13 per cent YoY volume growth. In order to achieve higher-than-industry growth in FY24, Somany plans to add more dealers and also increase the number of exclusive showrooms. For bath ware segment, management expects revenue to grow at 20-25 per cent on a year-on-year basis in FY24," it said.

It mentioned that the management has indicated a maintenance capex of Rs 500-550 million for the financial year 2024. Somany added around 300 dealers in FY23 and expects to add 300-500 dealers in FY24. It also opened 109 new exclusive Somany showrooms in FY23, the brokerage said.

"Somany is one of the leading players in the Indian tiles market with a significant presence in markets beyond tier-I cities. It has a strong brand with wide distribution and a broad product portfolio. The company focuses on the retail segment which accounts for 80 per cent of total revenue," it added.

The smallcap stock ended 1.17 per cent higher at Rs 630.80 on Monday. The market cap of the firm rose to Rs 2,658.67 crore.