1QFY2019 Result Update | Textiles
August 20, 2018
Siyaram Silk Mills
BUY
CMP
`512
Performance Update
Target Price
`700
Investment Period
12 months
Y/E March (` cr)
Sector
Textiles
1QFY19
1QFY18
% chg (yoy)
4QFY18
% chg (qoq)
Market Cap (Rs cr)
2,446
Net sales
322.1
320.6
0.5
595.9
(45.9)
Net Debt
549
EBITDA
34.0
33.1
2.7
98.0
(65.3)
Beta
0.6
EBITDA margin (%)
52 Week High / Low
799/385
10.5
10.3
23bp
16.4
(589bp)
Avg. Daily Volume
2,781
Adjusted PAT
9.9
10.4
(4.3)
52.0
(80.9)
Face Value (Rs)
2
Source: Company, Angel Research
BSE Sensex
38,245
Nifty
11,543
For 1QFY2019, Siyaram Silk Mills (SSML) posted subdued set of results, which
Reuters Code
SIYR.BO
were below our expectations on both, top-line as well as bottom-line fronts.
Bloomberg Code
SIYA IN
Revenue was flat yoy, however, the company reported operating margin
Shareholding Pattern (%)
improvement. On the bottom-line front, SSML reported de-growth of ~4% yoy to
Promoters
67.1
~`10cr due to subdued top-line growth.
MF / Banks / Indian Fls
8.5
FII / NRIs / OCBs
1.7
Overall top-line remained subdued: The company’s top-line grew almost flattish
Indian Public / Others
22.8
yoy to `322cr. During the quarter, marriage dates remained very low compared
Abs. (%)
3m
1yr
3yr
Sensex
8.0
19.3
36.1
to last year (70% of revenue comes from tier 2 & 3 cities), which impacted overall
SSM
(20.9)
25.3
137.0
sales.
PAT de-grew by 4%: On the operating front, the company’s margin has improved
by
23bps yoy at 10.5%. However, the company’s operating profit growth
remained flat mainly due to lower revenue growth.
Outlook and Valuation: Going forward, we expect SSML to report a net sales
CAGR of ~12% to ~`2,166cr and adj. net profit CAGR of ~15% to `152cr over
FY2018-20E on the back of market leadership in blended fabrics, strong brand
building, wide distribution channel, strong presence in tier II and tier III cities and
Historical share price chart
emphasis on latest designs and affordable pricing points. At the current market
900
prices, SSML trades at inexpensive valuations. We maintain our Buy
800
700
recommendation on the stock with a Target Price of `700.
600
500
Key Financials
400
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
300
200
Net sales
1,574
1,733
1,920
2,166
100
0
% chg
(2.8)
10.1
10.8
12.8
Adj. Net profit
91
111
131
152
% chg
91.0
115.0
131.2
152.4
EBITDA margin (%)
12.5
14.2
14.3
14.3
Source: Company, Angel Research
EPS (`)
19.4
24.5
28.0
32.5
P/E (x)
26.4
20.9
18.3
15.7
Amarjeet S Maurya
022-40003600 Ext: 6831
P/BV (x)
4.0
3.5
3.0
2.6
RoE (%)
15.3
18.1
16.5
16.4
RoCE (%)
15.8
14.8
15.3
16.1
EV/Sales (x)
1.7
1.7
1.5
1.3
EV/EBITDA (x)
13.6
11.9
10.6
9.3
Source: Company, Angel Research Note: CMP as of August 17, 2018
Please refer to important disclosures at the end of this report
1
Siyaram Silk Mills| 1QFY2019 Result Update
Exhibit 1: 4QFY2018 Performance
Y/E March (` cr)
1QFY19
1QFY18
% chg. (yoy)
4QFY18
% chg. (qoq)
FY18
FY17
% chg
Net Sales
322
321
0.5
596
(45.9)
1,733
1,574
10.1
Net raw material
127.7
129
(0.8)
299.5
(57.4)
773.8
738.61
4.8
(% of Sales)
39.7
40.2
(50)
50.3
(1,061)
44.7
46.9
Employee Cost
47
44
5.0
52
(10.0)
190
169
12.6
(% of Sales)
14.4
13.8
62
8.7
577
11.0
10.7
Other Expenses
114
114
(0.5)
147
(22.4)
524
470
11.4
(% of Sales)
35.4
35.7
(35)
24.6
1,073
30.2
29.9
Total Expenditure
288
288
0.2
498
(42.1)
1,487
1,377
8.0
Operating Profit
34
33
2.7
98
(65.3)
246
197
25
OPM (%)
10.5
10.3
23
16.4
(589)
14.18
12.50
168
Interest
11
6
76.9
12
(10.2)
34
32
7.9
Depreciation
16
15
4.3
16
0.5
61
55
11.0
Other Income
8
4
83.8
9
(11.8)
26
26
3.3
PBT before exceptional
15
16
(6.2)
79
(80.8)
177
136
30.4
(% of Sales)
4.7
5.0
13.3
10.2
8.6
Exceptional Items
-
6.0
6.0
-
PBT
15
16
(6.2)
73.0
(79.3)
171.3
136.0
26.0
Tax
5
6
(9.7)
25
(79.0)
60
45
32.7
(% of PBT)
34.5
35.8
31.5
33.7
33.1
Reported PAT
10
10
(4.3)
48
(79.4)
111
91
22.6
PATM
3.1
3.2
8.1
6.4
5.8
Extra-ordinary Items
-
(4)
(4)
-
Adj PAT
10
10
(4.3)
52
(80.9)
115
91
26.8
Source: Company
August 20, 2018
2
Siyaram Silk Mills| 1QFY2019 Result Update
Outlook and Valuation
Going forward, we expect SSML to report a net sales CAGR of ~12% to
~`2,166cr and adj. net profit CAGR of ~15% to `152cr over FY2018-20E on the
back of market leadership in blended fabrics, strong brand building, wide
distribution channel, strong presence in tier II and tier III cities and emphasis on
latest designs and affordable pricing points. At the current market prices, SSML
trades at inexpensive valuations. We maintain our Buy recommendation on the
stock with a Target Price of `700.
Downside risks to our estimates include
Decline in rural spending: Unseasonal rains or deficient rainfall in the rural areas
may result in lower agriculture output. This, in turn, could result in lower
discretionary spending among rural consumers, which could impact the company’s
overall sales.
Competition from the unorganized sector: SSML, being in a sector that’s highly
fragmented, faces intense competition from unorganized players as they usually
sell their products at a much cheaper rate compared to it. However, due to strong
branding efforts, huge distribution network and affordable price points, the
company is easily able to differentiate its products from those of competitors.
Fluctuation in raw material prices: SSML operates in a highly price-sensitive
market. Any fluctuation in raw-material prices can lead to margin compression, as
the company may not be able to pass on the entire increase to the end-user.
Company Background
SSML is the largest manufacturer of blended fabrics in India. The company enjoys
a strong brand presence across the country, with brands such as Siyaram’s,
Mistair, MSD, J. Hampstead and Oxemberg in its kitty. The company has also
launched three premium brands - Royal Linen (linen fabrics for men and women),
Moretti (cotton shirting) and Zenesis (cotton suitings). SSML 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. It has a wide distribution network comprising
1,600 dealers and 500 agents supplying to more than 40,000 outlets across India
and has ~160 franchise stores. The company operates four plants - one at
Tarapur near Mumbai for weaving and yarn dyeing, two at Daman for garments
and one at Silvassa for weaving.
August 20, 2018
3
Siyaram Silk Mills| 1QFY2019 Result Update
Profit & Loss Statement
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
Total operating income
1,574
1,733
1,920
2,166
% chg
(2.8)
10.1
10.8
12.8
Total Expenditure
1,377
1,488
1,646
1,857
Cost of Materials
739
774
855
964
Personnel
169
190
211
243
Others Expenses
470
524
580
650
EBITDA
197
245
275
310
% chg
4.8
24.8
11.9
12.8
(% of Net Sales)
12.5
14.2
14.3
14.3
Depreciation& Amortisation
55
61
66
69
EBIT
142
185
208
241
% chg
(2.7)
30.0
12.7
15.8
(% of Net Sales)
9.0
10.7
10.8
11.1
Interest & other Charges
32
34
41
44
Other Income
26
26
28
30
(% of PBT)
18.8
14.9
14.3
13.2
Share in profit of Associates
-
-
-
-
Recurring PBT
136
177
196
227
% chg
2.4
30.2
10.6
16.2
Prior Period & Extraordinary Expense/(Inc.)
-
(6)
-
-
PBT (reported)
136
183
196
227
Tax
45
60
65
75
(% of PBT)
33.1
32.8
33.0
33.0
PAT (reported)
91
123
131
152
Add: Share of earnings of associate
-
-
-
-
ADJ. PAT
91
117
131
152
% chg
3.9
26.4
14.0
16.2
(% of Net Sales)
5.8
6.8
6.8
7.0
Basic EPS (`)
19.4
24.5
28.0
32.5
Fully Diluted EPS (`)
19.4
24.5
28.0
32.5
% chg
3.9
26.4
14.0
16.2
August 20, 2018
4
Siyaram Silk Mills| 1QFY2019 Result Update
Balance Sheet
Y/E March (` cr)
FY2017
FY2018
FY2019E
FY2020E
SOURCES OF FUNDS
Equity Share Capital
9
9
9
9
Reserves& Surplus
497
587
669
785
Shareholders Funds
506
597
679
794
Minority Interest
-
-
-
-
Total Loans
408
305
573
570
Deferred Tax Liability
20
20
15
15
Total Liabilities
934
921
1,267
1,411
APPLICATION OF FUNDS
Gross Block
448
481
582
602
Less: Acc. Depreciation
49
86
143
209
Net Block
398
395
439
392
Capital Work-in-Progress
5
36
93
93
Investments
15
14
33
33
Current Assets
778
714
989
1,182
Inventories
331
316
430
505
Sundry Debtors
363
305
422
489
Cash
6
5
23
33
Loans & Advances
50
55
81
96
Other Assets
28
34
33
58
Current liabilities
261
238
286
288
Net Current Assets
516
476
703
893
Deferred Tax Asset
-
-
-
-
Mis. Exp. not written off
-
-
-
-
Total Assets
934
921
1,267
1,411
August 20, 2018
5
Siyaram Silk Mills| 1QFY2019 Result Update
Consolidated Cashflow Statement
Y/E March (`cr)
FY2017
FY2018
FY2019E
FY2020E
Profit before tax
136
177
196
227
Depreciation
55
61
66
69
Change in Working Capital
47
(281)
(179)
(190)
Interest / Dividend (Net)
18
19
41
44
Direct taxes paid
-
-
(65)
(75)
Others
(52)
(4)
-
-
Cash Flow from Operations
203
(28)
59
75
(Inc.)/ Dec. in Fixed Assets
(68)
(176)
(20)
(20)
(Inc.)/ Dec. in Investments
1
(19)
-
-
Cash Flow from Investing
(69)
(158)
(20)
(20)
Issue of Equity
-
-
-
-
Inc./(Dec.) in loans
-
-
(3)
-
Dividend Paid (Incl. Tax)
(0)
1
16
18
Interest / Dividend (Net)
(134)
204
(41)
(44)
Cash Flow from Financing
(135)
205
(28)
(26)
Inc./(Dec.) in Cash
(1)
19
11
29
Opening Cash balances
5
4
23
33
Closing Cash balances
4
23
33
62
August 20, 2018
6
Siyaram Silk Mills| 1QFY2019 Result Update
Key ratios
Y/E March
FY2017
FY2018
FY2019E
FY2020E
Valuation Ratio (x)
P/E (on FDEPS)
26.4
20.9
18.3
15.7
P/CEPS
19.4
24.5
28.0
32.5
P/BV
4.0
3.5
3.0
2.6
Dividend yield (%)
2.1
2.7
3.1
3.6
EV/Sales
1.7
1.7
1.5
1.3
EV/EBITDA
13.6
11.9
10.6
9.3
EV / Total Assets
2.3
1.9
1.7
1.5
Per Share Data (`)
EPS (Basic)
19.4
24.5
28.0
32.5
EPS (fully diluted)
19.4
24.5
28.0
32.5
Cash EPS
26.4
20.9
18.3
15.7
DPS
10.9
13.8
15.7
18.3
Book Value
127.3
144.8
169.5
198.1
Returns (%)
ROCE
15.8
14.8
15.3
16.1
Angel ROIC (Pre-tax)
16.1
15.5
16.1
17.2
ROE
15.3
18.1
16.5
16.4
Turnover ratios (x)
Asset Turnover (Gross Block)
3.3
3.0
3.2
3.5
Inventory / Sales (days)
73
91
96
98
Receivables (days)
71
89
93
95
Payables (days)
33
38
35
33
Working capital cycle (ex-cash) (days)
111
141
154
160
Source: Company, Angel Research
August 20, 2018
7
Siyaram Silk Mills| 1QFY2019 Result Update
Research Team Tel: 022 - 39357800
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Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
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contrary view, if any
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Disclosure of Interest Statement
Siyaram Silk Mills
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
Reduce (-5% to -15%)
Sell (< -15%)
August 20, 2018
8
