Siyaram Silk Mills - Diwali 2012 Pick - Angel Broking

Siyaram Silk Mills (SSM) is the largest manufacturer of blended fabrics in India. The company enjoys a strong brand presence across the country, with brands such as Siyaram's, Mistair, MSD, J. Hampstead and Oxemberg in its kitty.

Being the largest manufacturer of blended fabrics in India, SSM enjoys a 4% market share in this segment. Polyester viscous fabric, which has become a cheaper substitute of cotton fabric, is the major contributor to SSM's revenue (~Rs.700-800cr in FY2012). With increasing demand for polyester viscous fabric and shift from unbranded fabric to branded ones in tier II and tier III cities, we expect SSM to register a revenue CAGR of 12.0% over FY2012-14E to Rs.1,149 in FY2014E.

The company is engaged in aggressive marketing with celebrity brand ambassadors like M S Dhoni, Neil Nitin Mukesh and Hrithik Roshan. Moreover, the company has one of the largest distribution networks in the country and is further planning increase the exclusive store count to 300 from 125 presently in the coming two to three years through franchisee route.

At the current market price of Rs.316, the stock is trading at a PE of 4.3x its FY2014E earnings. We maintain our Buy rating on the stock with a target price of Rs.366, valuing the stock at 5x FY2014E earnings.

Source : Equity Bulls

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