Siyaram Silk Mills - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, Siyaram Silk Mills (SSM) reported in-line performance. The company's net sales grew by 20.7% qoq and 9.1% yoy to Rs.268cr. OPM contracted by 81bp yoy to 12.2%. Net profit witnessed an 8.4% yoy decline to Rs.17cr. We continue to maintain our Buy view on the stock.

Top line increases, EBITDA margin declines: During the quarter, SSM's top line increased by 20.7% qoq and 9.1% yoy to Rs.268cr on the back of a seasonally strong quarter. The company's EBITDA increased by 2.4% yoy to Rs.33cr on the back of margin compression during the quarter. EBITDA margin contracted by 81bp yoy to 12.2% due to higher raw-material cost, which increased significantly by 959bp yoy to 46.5% of sales, which was somewhat offset by lower other expenditure, which declined by 642bp yoy to 13.2%. For 4QFY2012, SSM witnessed an 8.4% yoy decline in PAT to Rs.17cr on the back of margin compression and higher interest and depreciation cost.

Outlook and valuation: SSM is in a strong expansion mode. The company plans to add 286 looms (479 current looms) in a phased manner over FY2012-14 in the fabric segment and will be adding 400 machines in its readymade garment (RMG) segment by FY2013. Moreover, timely capacity expansion will help the company to take full advantage of the growing demand in India, which will drive its revenue at a 13.2% CAGR over FY2012-14E. The stock is currently trading at reasonable valuation of 3.3x FY2014E earnings (as against its historical median of 5x one-year forward EPS). We continue to maintain our Buy rating on the stock with an upgraded target price of Rs.392, valuing the stock at 5x FY2014E earnings.

Source : Equity Bulls

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