INSUBCONTINENT EXCLUSIVE:
ICICI Direct has a buy call on Siyaram Silk Mills with a target price of Rs 650.
The current market price of Siyaram Silk Mills is Rs
525.55.
Time period given by the brokerage is one year when Siyaram Silk Mills price can reach the defined target.
The view of the brokerage
on the company:
New brand launches to enhance revenue growth for garments: The garmenting space is expected to be the next leg of growth for
The garmenting division delivered a superior performance in FY18 with revenues increasing 20 per cent YoY to Rs 401.9 crore (14 per cent
volume growth, 6 per cent realisation growth)
price point product category
The shift towards garmenting is visible as share of garments has increased from 21 per cent in FY17 to 23 per cent in FY18
Furthermore, garmenting division yields superior operating margins (16-17 per cent) against the fabric division (12-13 per cent)
We model 18 per cent revenue CAGR in FY18-20E for the garmenting division.
Increased in house processing capacity, premium brand Cadini to
enhance margins for fabrics segment: After a suppressed performance in the fabric division for FY17, a recovery was visible with revenues
increasing 10 per cent YoY to Rs 1269.7 crore in FY18
The brand witnessed healthy traction with revenues increasing 31 per cent YoY to Rs 130 crore in FY18
Share of Cadini brand in total fabric sales has increased from 4 per cent in FY16 to 10 per cent in FY18
SSML is enhancing its processing fabric capacity from the current 3.6 crore metre to 4.8 crore metre
Higher in-house processing capacity is expected to enhance margins for fabric division.
Recovery in due course; maintain BUY: The management
addressed the key issue regarding the sluggish recovery in trade channels post implementation of GST
Also, working capital days are expected to remain elongated, keeping debt levels high in FY19E
Going forward, with stabilisation of trade channels, we expect working capital to ease out in FY20E and generate healthy cash flow from
Factoring in the performance of Q1FY19, we revise our estimate downwards for FY19E, FY20E
Going forward, we expect overall revenues to increase at 10 per cent CAGR and PAT to grow at 17 per cent CAGR in FY18-20E
We value SSML at Rs 650 i.e
20x P/E on FY20E EPS of Rs 32.7 with a BUY rating on the stock.
