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February 8, 2012
BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (`cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Textile 260 1.0 464/224 3,702 10 17,707 5,368 SIYR.BO SIYA@IN
`277 `380
12 Months
For 3QFY2012, Siyaram Silk Mills (SSM) reported a weak performance. The companys net sales declined by 9.2% qoq and 2.6% yoy to `222cr. OPM expanded by 9bp yoy to 13.2%. Net profit witnessed a 17.0% yoy decline to `13cr. We continue to maintain our Buy view on the stock. Top line declines, EBITDA margin flat: During the quarter, SSMs top line declined by 9.2% qoq and 2.6% yoy to `222cr, on the back of slowdown in demand. EBITDA declined by 2.0% yoy to `29cr on the back of lower revenue during the quarter. EBITDA margin expanded by 9bp yoy to 13.2% due to lower rawmaterial cost, which declined by 283bp yoy to 36.3% (39.1%) of sales. The decline in raw-material cost was partially offset by a 224bp yoy increase other expenditure to 21.4% (19.1%) of sales. For 3QFY2012, SSM witnessed a 17.0% yoy decline in PAT to `13cr on the back of lower revenue and higher interest and depreciation cost. Outlook and valuation: SSM is in a strong expansion mode. The company plans to add 286 looms (479 current looms) in a phased manner over FY2011-13 in the fabric segment and will be adding 400 machines in its readymade garment (RMG) segment by June 2012. Moreover, timely capacity expansion will help the company to take full advantage of the growing demand in India, which will drive its revenue at an 11.6% CAGR over FY2011-13E. The stock is currently trading at reasonable valuation of 4.4x FY2013E earnings (as against its historical median of 6x one-year forward EPS). We continue to maintain our Buy rating on the stock with a revised target price of `380, valuing the stock at 6x FY2013E earnings.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 67.1 6.6 0.1 26.3
3m 0.2 (11.1)
Key financials
Y/E March (` cr) Net sales % chg Net profit % chg FDEPS (`) EBITDA margin (%) P/E (x) RoE (%) RoCE (%) P/BV (x) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research
FY2010 660 24.4 34 194.2 35.9 10.6 7.7 21.6 13.0 1.5 0.6 6.0
FY2011 859 30.2 58 71.2 61.5 12.7 4.5 29.6 19.5 1.2 0.6 4.8
FY2012E 917 6.8 55 (4.7) 58.6 12.9 4.7 22.8 16.9 1.0 0.6 4.8
FY2013E 1,069 16.6 59 8.0 63.3 12.2 4.4 20.7 16.6 0.8 0.5 4.2
Sharan Lillaney
022-3935 7800 Ext: 6811 sharanb.lillaney@angelbroking.com
38.4 30.2
45 40 35 30 25 20 15 10 5 0 -5
Net Sales
Source: Company, Angel Research
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7.0
7.6
17 2QFY12 Margin
13 3QFY12
1 0
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Investment arguments
SSM is one of the leading textile manufacturers in India. The company enjoys a strong brand presence across the country, with brands such as Siyaram, Mistair, J Hampstead and Oxemberg in its kitty.
Strong brand presence: SSM has built a strong brand presence in the country
through continuous advertisement and brand-building efforts over the past 30 years. The company has created a niche for itself in a highly competitive industry. SSM enjoys a monopolistic position for its fabric segment under the Siyaram brand, which constitutes nearly 85% of its revenue.
Largest distribution network across India: SSM has one the largest
distribution networks in the country. The company has a strong network of over 1,500 dealers and 500 agents supplying to more than 40,000 outlets across India. This enables the company to launch new products with a high success ratio and low marketing cost, giving it an edge over competitors.
Higher utilization to drive growth: SSMs yarn segment achieved 57% capacity
utilization in FY2011 compared to 41.9% in FY2009, which is further expected to improve to 80% in FY2012E.
Estimates FY2012 6.8 12.9 31.5 6.0 FY2013 16.6 12.2 31.5 5.5
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Balance sheet
Y/E Mar. (` cr) SOURCES OF FUNDS Equity share capital Reserves& surplus Shareholders funds Total loans Deferred tax liability Total liabilities APPLICATION of FUNDS Gross block Less: Acc. depreciation Net block Capital work-in-progress Investments Current Assets Current liabilities Net Current Assets Total Assets 325 120 205 2 248 61 186 393 337 137 200 28 251 102 149 378 387 157 231 1 18 408 135 272 522 436 181 256 75 3 405 140 265 598 526 210 316 3 461 160 302 621 9.4 133 142 233 18 393 9.4 160 170 190 18 378 9.4 211 220 286 17 522 9.4 254 263 319 17 598 9.4 300 309 295 17 621 FY2009 FY2010 FY2011 FY2012E FY2013E
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Key ratios
Y/E Mar. Valuation Ratio (x) P/E (on FDEPS) P/E (on basic, reported EPS) P/CEPS P/BV Dividend yield (%) Market cap. / Sales EV/Sales EV/EBITDA EV / Total Assets Per Share Data (Rs) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book value Dupont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of debt (Post Tax) Leverage (x) Operating RoE Returns (%) RoCE (Pre-tax) Angel RoIC (Pre-tax) RoE Turnover ratios (x) Asset turnover (Gross Block) Asset turnover (Net Block) Asset turnover (Total Assets) Operating income / Invested capital Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Gross debt to equity Net debt to equity Net debt to EBITDA Interest coverage (EBIT / Interest) 1.6 1.6 5.5 2.5 1.1 0.9 2.3 5.9 1.3 1.2 2.4 7.4 1.2 1.2 2.6 4.7 1.0 0.9 2.2 5.0 1.7 2.6 1.3 1.3 71 85 41 138 2.0 3.3 1.7 1.8 52 64 45 91 2.4 4.0 1.9 2.0 51 64 51 88 2.2 3.8 1.6 1.7 61 71 55 106 2.2 3.7 1.8 1.8 59 64 51 96 5.7 5.7 8.2 13.0 13.6 21.6 19.5 20.7 29.6 16.9 18.6 22.8 16.6 17.9 20.7 4.4 78.1 1.3 4.4 5.2 1.8 3.1 7.6 68.7 1.8 9.3 3.9 1.2 16.0 10.2 69.5 2.0 14.4 4.3 1.1 25.1 10.3 68.5 1.7 11.8 5.7 1.1 18.8 9.5 68.5 1.8 11.5 5.8 1.0 17.1 12.2 12.2 32.7 5 151.8 35.9 35.9 57.5 6 181.2 61.5 61.5 83.8 7 234.6 58.6 58.6 84.2 11 280.5 63.3 63.3 94.8 12 330.1 22.7 22.7 8.5 1.8 1.8 0.5 0.9 11.6 1.2 7.7 7.7 4.8 1.5 2.2 0.4 0.6 6.0 1.1 4.5 4.5 3.3 1.2 2.5 0.3 0.6 4.8 1.0 4.7 4.7 3.3 1.0 3.9 0.3 0.6 4.8 1.0 4.4 4.4 2.9 0.8 4.3 0.2 0.5 4.2 0.9 FY2009 FY2010 FY2011 FY2012E FY2013E
February 8, 201
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Ratings (Returns):
February 8, 201