Hold Siyaram Silk Mills; target of Rs 2265: ICICI Direct

ICICI Direct's research report on Siyaram Silk Mills
Despite destocking of inventories at the dealer level (before implementation of GST), Siyaram reported healthy topline growth of 13.4% YoY to Rs 320.6 crore. On account of better product mix (higher share of premium brands), gross margins expanded 370 bps YoY to 59.8%. However, increase in processing charges (up 131 bps YoY) and other expenses (up 266 bps YoY) led to decline in EBITDA margins by 30 bps YoY to 10.3%. Subsequently absolute EBITDA increased by 10.4% YoY to Rs 33.1 crore.

Outlook

However as the stock has already run up 17% since our last update, we assign a HOLD recommendation with a target price of Rs 2265 (based on 15x FY19E EPS of Rs 151.0).

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