Siyaram Silk Mills - CMP: Rs.303; Target Price: Rs.374 - Karvy

Siyaram Silk Mills (SSML) is one of the leading producers of blended fabrics in India including yarn dyeing, fabrics, ready-to-wear garments and home textiles. It is implementing Rs. 2.2 bn capex over the next 2-2½ years to increase its annual fabric capacity and number of garments per month, which will enable SSML to capitalise on growing demand for branded fabric and apparel.

The wholesale distribution accounts for 90%-95% of its total revenues with a strong network of over 400 agents, 1,500 distributors and ~65,000 retailers, and it is is planning to reach 500-mark in 2-3 years.

We expect SSML to post an EPS of Rs. 63.8 and Rs.74.7 in FY13E and FY14E, respectively. We initiate coverage on SSML with "BUY" recommendation and a target price of Rs. 374 per share - applying a 5x multiple for FY14E EPS - representing 23% upside from the CMP.

Source : Equity Bulls

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