Buy Siyaram Silk Mills; target of Rs 270: ICICI Direct

ICICI Direct is bullish on Siyaram Silk Mills has recommended buy rating on the stock with a target price of Rs 270 in its research report dated August 16, 2019.

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August 20, 2019 / 15:20 IST

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ICICI Direct's research report on Siyaram Silk Mills

Tepid consumption demand and seasonally weak quarter led SSL to report muted revenue growth of 1.2% YoY to Rs 326.0 crore. The market environment remained challenging with MBO’s facing liquidity issues. Despite muted revenue growth, efforts towards controlled operational cost structure resulted in EBITDA margins remaining constant YoY at 10.5%. Employee expenses and other expenses (adjusting for Ind-AS 116) remained flattish YoY at Rs 46.9 crore and Rs 79.1 crore, respectively. Lower depreciation expense (down 3% YoY to Rs 15.1 crore) and finance cost (down 13% YoY to Rs 9.6 crore) aided PAT growth. Resultant adjusted PAT grew 6.4% YoY to Rs 10.5 crore.

Outlook

We expect revenue to grow at a CAGR of 7% in FY19-21E, with EBITDA margins remaining range bound at ~13%. SSML’s stock price witnessed a significant correction of ~33% since our last result update, making it available at valuation of 8.5x FY21E earnings. Hence, we have a BUY recommendation with a revised target price of Rs 270 (10x FY21E EPS).

For all recommendations report, click here