Hold Siyaram Silk Mills; target of Rs 1330: ICICI Direct

ICICI Direct's research report on Siyaram Silk Mills

In its bid to enhance its product portfolio SSML has signed a JV with Italian lifestyle brand Cadini to sell superior fabrics and garments. It recently launched five new Exclusive Brand Outlet (EBO) of Cadini. SSML is planning to open 10 EBO’s by FY17, each store spread across 1000- 2000 square feet. The inventory will be a mix of domestic and Italian products. Approx 20% of the inventory will be from Italy and remaining would be manufactured domestically.

H2FY17 is generally a strong period for the company on account of festive and wedding seasons. However being in the sector which has sizeable magnitude of cash transactions, the company may be impacted on account of demonetisation. Therefore we expect the company to register a subdued revenue growth in FY17E. However we anticipate the impact for the same to remain for a shorter term and going forward we expect a revival in sales growth from FY18E onwards driven by the garment segment. We have factored the impact of demonetisation and revised our EPS downwards. We expect EPS to grow at 13.6% CAGR to Rs 132.9 in FY16-FY19E. We have a HOLD recommendation on the stock with revised target price of Rs 1330 (based on 10x FY19E EPS of Rs 132.9). However we advise caution while buying owing to low liquidity in such stocks.