Buy Siyaram Silk Mills; target of Rs 1102: Angel

Angel Broking's report on Siyaram Silk Mills (SSML)

Siyaram Silk Mills (SSML) has reported lower-than-estimated numbers for 3QFY2015. Its net sales increased by 7.2% yoy to Rs 330cr, lower than our estimate of Rs 367cr. The OPM improved on a yoy basis to 10.5%, however lower than our estimate of 10.7%. The net profit declined by 7.8% yoy to Rs 13cr, lower than our estimates of Rs 19cr, led by higher interest cost, depreciation and tax rate.

In FY2014, SSML reported a strong 25.2% growth in its net sales due to introduction of new brands and segments. SSML had launched two new premium cotton brands – Zenesis and Moretti, ventured into women’s segment, and penetrated further into new growth areas like cotton shirting, linen fabrics etc. However, in 9MFY2015, the sales growth has moderated due to dampened sentiments in rural areas as is evident from the lower growth recorded by the agricultural sector. We expect SSML to post modest revenue CAGR of 12.5% over FY2014-17E to Rs 1,855cr.

"SSML is trading at a PE multiple of 7.4x on FY2017E earnings, which is inexpensive considering its strong fundamentals. We reiterate our Buy rating on the stock with an upgraded target price of Rs 1,102, valuing the stock at a higher PE multiple of 9x FY2017E earnings", says Angel Broking research report.

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