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Epic Research
Siyaram Silk Mills (Accumulate)
CMP: ₹336.05
Target: ₹395
Siyaram Silk Mills is a holding company. The company is engaged in manufacturing fabrics and readymade garments. The Company is engaged in the textile business. The company’s portfolio includes yarns, home furnishing, retail, ready-to-wear and fabrics.
Siyaram’s top line for Q4FY19 has grown by over 32 per cent to ₹587 crore as against ₹446 crore in previous Quarter. Net profit has increased to ₹46.76 crore as against ₹20.08 crore in the previous quarter. Topline contracted by about 1 per cent on y-o-y basis owing to subdued demand side and dealer level realisations.
Management is keen on investing in marketing and brand building. We can expect a little above double digit top line expansion.
Valuation: Siyaram Silk Mills is a good buy at current levels. Stock has corrected more than 50 per cent in recent corrections. We expect double digit growth in revenue and EBITDA as per our estimates owing to good monsoon and increase in domestic consumption cycle for coming season. Siyaram is currently trading at arund 12x of FY19 and 9.5x of FY20 eps. We recommend ‘accumulating’ stocks at current level for a tarrget of ₹395 valuing share at 13x of FY20 earnings and 2.2x of FY20 book value.
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