Buy Siyaram Silk Mills; target Rs 495: Sushil Finance

“Siyaram Silk Mills (SSML) has reported good set of numbers for the quarter ended September’11 which is in-line with our expectations, with Revenue and PAT increasing by ~14% and 17% YoY to Rs.2444 mn and Rs.170 mn respectively.  Revenues grew by ~14% YoY from Rs.2155 mn in Q2FY11 to Rs.2444 mn in Q2FY12 which was majorly on back of better realization in Fabrics & Ready-made garments (RMG) which improved by ~18% & 7% respectively on YoY basis. Of the total revenues in Q2FY12, ~77% was contributed by Fabric division followed by RMG and Yarn dying division which contributed ~16% and 4% respectively. In H1FY12 revenues grew by ~11% from Rs.3852 mn to Rs.4256 mn.”

“Operating profit grew by ~20% YoY from Rs.274 mn to Rs.328 mn in Q2FY12, while margins improved by 70 bps to 13.4% which was mainly on account of lower rawmaterial & other expenses. In H1FY12 operating profit grew by 16% to Rs.546 mn whereas margins improved by 60 bps to 12.8%. Net Profit grew by 17% YoY from Rs.145 mn to Rs.170 mn in Q2FY12 whereas NPM improved marginally by 20 bps YoY to 6.9%. Rising interest rates coupled with increasing working capital requirement led to higher interest cost which grew by 86% to Rs.61 mn. However net profit for H1FY12 increased by 15% to Rs.265 mn while margins stood at 6.2% v/s 6.0%. EPS for Q2FY12 & H1FY12 stood at Rs.18 & Rs.28 respectively which is inline with our expectations.”

“SSML is one of the leading textile manufacturers with many popular brands under its kitty. Increasing brand consciousness coupled with rising per capita income has stimulated demand for its various products. Vast distribution network facilitates further penetration to have pan-India presence giving it a competitive edge. At CMP of Rs.268, the stock is trading at a very attractive valuation of 4.0x & 3.4x its FY12E & FY13E EPS of Rs.67 and Rs.77 respectively. Hence considering decent quarterly results coupled with good growth prospects of the company, we maintain our Buy rating on the stock with a price target of Rs 495,” says Sushil Finance research report.

Public holding more than 90% in Indian cos

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