Centrum Wealth
Siyaram Silk
(Outperformer)
CMP: ₹653.95
Target: ₹797
Siyaram Silk Mills Ltd (SSML), for Q3FY18, reported good set of numbers on a low base of last year (demonetisation impact on demand). Revenue grew by 16 per cent y-o-y to ₹394 crore, with net profit increasing by 64 per cent to ₹22 crore. EBITDA margins expanded by 50 bps to 12.8 per cent, on account of stable raw material cost as a per cent of sales (up 8 bps to 41.5 per cent) and lower employee expenses (down 44 bps to 12 per cent).
At the CMP, SSML is giving a return of about 12 per cent since the update and is currently trading at P/E of 24.8x/20.4x on FY19E/20E basis. Although the valuations seem to be mature, we maintain our view that SSML will continue outperforming over the long term. We anticipate, GST related disruptions (higher debt/working capital cycle/ low dealer demand), to continue in the near term. We believe SSML’s brand building exercise along with focus on retail expansion could augur well going ahead.