Buy Siyaram Silk Mills; target of Rs 366: Angel Broking

Angel Broking is bullish on Siyaram Silk Mills and has recommended buy rating on the stock with a target of Rs 366 in its October 30, 2012 research report.

“Siyaram Silk Mills (SSM) reported a mixed set of numbers for 2QFY2103. The revenue grew 9.3% yoy and came in at Rs267cr, in line with our estimate of Rs268cr. However, the operating margin showed contraction of 383bp yoy to 9.6% for the quarter. The company reported other income of Rs10cr which included a one-time insurance premium payment from the directors, leading to a bottom-line of Rs18cr, a growth of 5.5% yoy. Following the tradition, the company is expected to post strong numbers in the 2HY2013 with the festive and wedding season coming in.”

“Being the largest manufacturer of blended fabric in India, SSM enjoys 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 (~Rs700-800cr in FY2012). With a portfolio of strong and value for money brands like Siyaram’s, J Hampstead and Mistair in its fabric segment, SSM is well placed to cater to the increasing demand for polyester viscose fabrics. 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. These factors together are expected to drive the sales at a 12.0% CAGR over FY2012-14E.”

“ We expect SSM to post a revenue CAGR of 12.0% over FY2012-14E to Rs1,149cr with an operating margin of 12.9% in FY2014E. On the profitability front, the company is expected to post a profit of Rs62cr and Rs69cr for FY2013E and FY2014E respectively. The stock is currently trading at a reasonable valuation of 4.2x FY2014E earnings. We continue to maintain our buy rating on the stock with a revised target price of Rs 366, valuing the stock at 5x FY2014E earnings,” says Angel Broking research report.

Non-Institutions holding more than 90% in Indian cos

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