ICICI Direct's research report on Siyaram Silk Mills
Gross margins improved substantially well to 58% in Q3FY17 vs. 48% in Q3FY16 as share of purchase of traded goods declined. However, increase in employee expenses as a percentage to sales (12.5% vs. 8.7% in Q3FY16), coupled with higher processing charges as a percentage to sales (10% vs. 8% in Q3FY16) dented the operating margins, to a certain extent. EBITDA margins expanded 100 bps YoY to 12.4%. Subsequently absolute EBITDA de-grew 11.4% YoY to Rs 41.9 crore.
OutlookThe scaling up of the garmenting & premium products share remains critical for upgrading the valuation multiple. We expect EPS to grow at 12.5% CAGR to Rs 129.1 in FY16-FY19E. We have a HOLD recommendation on the stock with revised target price of Rs 1420 (based on 11x FY19E EPS of Rs 129.1). However we advise caution while buying owing to low liquidity in such stocks.
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