Siyaram Silk Mills - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Siyaram Silk Mills (SSM) reported in-line performance. The company's net sales grew by 13.5% yoy to Rs.206cr. OPM contracted by 87bp yoy to 11.2%. Net profit increased by 8.2% to Rs.10cr. 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 13.5% yoy to Rs.206cr on the back of a seasonally strong quarter. The company's EBITDA increased by 5.3% yoy to Rs.23cr on the back of margin compression during the quarter. EBITDA margin contracted by 87bp yoy to 11.2% due to higher raw-material cost including purchase of traded goods, which increased significantly by 160bp yoy to 48.3% of sales, which was somewhat offset by lower processing & labor charges. PAT increased by 8.2% yoy to Rs.10cr, higher than EBITDA growth due to higher other income during the quarter, which increased by 77.8% yoy to Rs.3cr.

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 3.6x 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

Keywords