Siyaram Silk Mills - 4QFY2013 Result Review - Angel Broking

For 4QFY2013, Siyaram Silk Mills (SSM) reported numbers mixed set of numbers. The company's top line grew by 8.3% yoy to Rs. 290cr, in-line with our estimate of Rs. 296cr for the quarter. However, the company disappointed on the operating margin front as it came in at 91bp lower to 10.3% for the quarter against our estimate of 13.0% mainly due to higher than expected raw material cost as a per cent of net sales. On yoy basis, the operating margin dipped by 177bp yoy mainly because of higher other expense. Interest outgo for the quarter was Rs. 5cr, against our estimate of Rs. 10cr and depreciation cost for the quarter stood at Rs. 6cr, against our estimate of Rs. 11cr. Consequently, the company reported a bottomline of Rs. 13cr, 23.8% lower yoy, in line with our expectation.

On annual basis, the company's top line grew by 13.7% to Rs. 1,041cr against our estimate of 1,048cr. Due to higher than expected raw material cost, the company's operating margin stood at 10.6%, 69bp lower than our estimate of 11.3%. The interest cost as a per cent of loan decreased from 11.2% to 10.4% leading to an interest outgo of Rs. 29cr. Also, depreciation cost for the year stood at Rs. 22cr, against our estimate of Rs. 27cr. The company's profit for the year dipped marginally by 3.0% as compared to FY2012 and came at Rs. 55cr, in line with our expectation.

During the year the company installed 129 looms and 101 garment machines and further plans to add 50 looms and 100 garment machines in FY2014E. Also, the company has signed 27 franchise agreements in the first two months of FY2014 out of targeted 90 for the full year for strengthening and improving brand visibility. At CMP of Rs. 262, the stock is trading at a PE of 3.2x FY2015E earnings. We maintain our Buy recommendation on the stock with a revised target price of Rs. 331 based on a target P/E of 4.0x for FY2015E.

Source : Equity Bulls

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