Siyaram Silk Mills - 4QFY2015 Result Update - Angel Broking

Siyaram Silk Mills (SSML) reported better-than-estimated numbers for 4QFY2015. The company's top-line for the quarter grew by 18.3% yoy to Rs. 480cr, higher than our estimate of Rs. 447cr. During the quarter, higher raw material cost was offset by lower other expense and employee expense. This resulted in the operating margin expanding by 153bp yoy to 12.2%, against our estimates of 10.9%. Further, a lower tax rate (29.2% vs 36.2%) resulted in the net profit increasing by 59.2% yoy to Rs. 32cr, higher than our estimate of Rs. 23cr.

Sales growth to moderate: The stellar growth in FY2014 was on back of strong performance across its business verticals - Fabrics, Yarn and Garment, in addition to venturing into women's segment. In FY2015, the sales growth has moderated due to lower growth in its Fabrics and Yarn division. However, growth in its key brand - J.Hamstead, and in its Shirting and Garment division continued to be strong in FY2015. We expect net sales to grow at a CAGR of 11.4% over FY2015-17E to Rs. 1,873cr.

Better product mix to result in margin expansion: SSML is increasing the share of readymade garments segment in its product mix, which has higher margins. The revenue share of readymade garments has increased to 18% in FY2015 from 15.1% in FY2014 which contributed to margin expansion. Further, higher realization from the premium cotton brands and stable performance of J.Hamstead would likely result in the EBIDTA margin gradually improving to 12.2% by FY2017E.

Outlook and Valuation: We believe that with market leadership in blended fabrics, strong brand building, wide distribution channel, strong presence in tier II and tier III cities and emphasis on latest designs and affordable pricing points, SSML will be able to post a revenue CAGR of 11.4% over FY2015-17E to Rs. 1,873cr with an EBITDA margin of 12.2% by FY2017E. We expect profit to grow at a CAGR of 21.3% over FY2015-17E to Rs. 116cr. SSML is trading at a PE multiple of 8.7x its FY2017E earnings. We recommend a Buy rating on the stock with a target price of Rs. 1,221, valuing the stock at a PE multiple of 10x its FY2017E earnings.

Shares of SIYARAM SILK MILLS LTD. was last trading in BSE at Rs.1118.5 as compared to the previous close of Rs. 1109. The total number of shares traded during the day was 1112 in over 112 trades.

The stock hit an intraday high of Rs. 1145 and intraday low of 1100. The net turnover during the day was Rs. 1255802.

Source : Equity Bulls

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