Please refer to important disclosures at the end of this report
1
Y/E March (` cr)
2
QFY20
2
QFY19
% chg (yoy)
1QFY20
%
Net sales
488
459
6.3
326
49.6
EBITDA
55
62
-10.8
38
45.4
EBITDA margin (%)
11.3
13.5
(217bp)
11.6
(32bp)
Reported PAT
30
24
23.4
10
202.1
Source: Company, Angel Research
For 2QFY2020, Siyaram Silk Mills (SSML) posted results in-line with our
expectations on both top-line and bottom-line fronts. Revenue grew ~6% yoy. On
the margin front, the company's operating margin contracted by 217bps yoy. On
the bottom-line front, SSML reported PAT growth of ~23% yoy to ~`30cr due to
lower taxes.
Overall top-line remains modest: The company’s top-line grew ~6% yoy to
`488cr. During the quarter, we see some recovery in urban and rural revenue,
especially in tier 2 &3 cities, which contributes 70% of SSML’s revenue.
PAT grew flat: On the operating front, the company’s margin contracted by
217bps yoy at 11.3%. On the bottom-line front, SSML reported PAT growth of
~23% yoy to ~`10cr due to lower taxes.
Outlook and Valuation: Going forward, we expect SSML to report net sales CAGR
of ~9% to ~`2,168cr and adj. net profit CAGR of ~13% to `143cr over FY2019-
21E on the back of market leadership in blended fabrics, strong brand building,
wide distribution channel and strong presence in tier 2 and tier 3 cities coupled
with 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 `333.
Key Financials
Y/E March (` cr)
FY2018
FY2019
FY2020E
FY2021E
Net sales 1,733 1,815 1,971 2,168
% chg 10.1 4.7 8.6 10.0
Adj. Net profit 112 101 119 143
% chg 22.6 (9.3) 17.5 20.2
EBITDA margin (%) 13.8 13.0 12.6 13.1
EPS (`) 24.6 22.3 25.4 30.5
P/E (x) 9.1 10.1 8.8 7.3
P/BV (x) 1.5 1.4 1.2 1.1
RoE (%) 16.4 13.4 13.8 14.5
RoCE (%) 14.3 14.5 13.4 14.5
EV/Sales (x) 0.9 0.8 0.7 0.6
EV/EBITDA (x)
6.5
6.2
5.8
4.9
Source: Company, Angel Research Note: CMP as of October 18, 2019
BUY
CMP `224
Target Price `333
Investment Period 12 months
Stock Info
Sector Textiles
Market Cap (` cr) 1,143
Net Debt (` cr)
412
Beta 0.6
52 Week High / Low 467/192
Avg. Daily Volume 964
Face Value (`) 2
BSE Sensex 39,176
Nifty 11,641
Reuters Code SIYR.BO
Bloomberg Code SIYA.IN
Shareholding Pattern (%)
Promoters
67.1
MF / Banks / Indian
12.9
FII / NRIs / OCBs 1.3
Indian Public/Others
18.7
Abs.(%) 3m 1yr 3yr
Sensex 1.0
14.5
40.1
SSM (20.3) (40.7) 26.7
Historical share price chart
Source: Company, Angel Research
Amarjeet S Maurya
022-40003600 Ext: 6831
amarjeet.maurya@angelbroking.com
Siyaram Silk Mills
Performance Update
0
100
200
300
400
500
600
700
800
900
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Jul-19
Oct-19
2
QFY2020 Result Update | Textiles
October 22, 2019
Siyaram Silk Mills| 1QFY2020 Result Update
October 22, 2019
2
Exhibit 1: 2QFY2020 Performance
Y/E March (` cr) 2
QFY20
2
QFY19
% chg. (yoy)
1QFY20
% chg. (qoq) 1HFY
20
1HFY19
% chg
Net Sales
488
459
6.3
326
49.6
814
781
4.2
Net raw material
234
197
18.7
132.4
76.4
366
325
12.8
(% of Sales)
47.9
42.9
500
40.6 728 45.0 41.6
Employee Cost
57
51
10.8
47
21.5
104
98
6.1
(% of Sales)
11.7
11.2
48
14.4 (271) 12.8 12.5
Other Expenses
142
149
(4.5)
109
30.6
251
262
(4.5)
(% of Sales)
29.1
32.4
(331) 33.3 (425) 30.8 33.6
Total Expenditure
432
397
9.0
288
50.2
720
685
5.2
Operating Profit
55
62
(10.8)
38
45.4
93
96
(2.8)
OPM (%)
11.3
13.5
(217) 11.6 (33) 11.4 12.3
(83)
Interest
11.3
12.0
(5.8)
11
3.1 22.3
23.0
(3.0)
Depreciation
18.1
16.2
12.2
18
(0.7) 36.4
31.7
14.7
Other Income 4.3
6.2
(30.9)
7 (34.7) 10.8
13.9
(22.3)
PBT before exceptional
30
40
(24.7)
15
96.9
45
55
(17.7)
(% of Sales) 6.1
8.7
4.7 5.6 7.0
Exceptional Items
-
-
PBT
30
40
(24.7)
15
96.9 45.2 55.0
(17.7)
Tax
(0.2)
15.4
(101.0)
5 (103.0) 5.1
20.6
(75.3)
(% of PBT)
(0.5)
38.7
34.5 11.3 37.5
Reported PAT
30
24
23.4
10
202.1
40
34
16.8
PATM 6.2
5.3
3.1 4.9 4.4
Extra-ordinary Items
0
-
3
0 -3
Adj PAT
30
27
10.3
10.0
202.1
40
37
7.6
Source: Company
Siyaram Silk Mills| 2QFY2020 Result Update
October 22, 2019
3
Outlook and Valuation
Going forward, we expect SSML to report net sales CAGR of ~9% to ~`2,168cr
and adj. net profit CAGR of ~13% to `143cr over FY2019-21E on the back of
market leadership in blended fabrics, strong brand building, wide distribution
channel and strong presence in tier 2 and tier 3 cities coupled with 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 `333.
Downside risks to our estimates include
Decline in rural spending: Unseasonal rain 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, impacting the company’s overall
sales.
Competition from the unorganized sector: SSML, being in a sector that is 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 users.
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.
Siyaram Silk Mills| 2QFY2020 Result Update
October 22, 2019
4
Profit & Loss Statement
Y/E March (` cr) FY2018 FY2019 FY2020
E
FY2021E
Total operating income
1,733
1,815
1,971
2,168
% chg 10.1 4.7
8.6
10.0
Total Expenditure
1,493
1,578
1,723
1,884
Cost of Materials
774
806
840
924
Personnel
190
198
233
256
Others Expenses
530
574
650
705
EBITDA
240
237
248
284
% chg 21.8 (1.3)
5.0
14.4
(% of Net Sales) 13.8 13.0
12.6
13.1
Depreciation& Amortisation
61
62
73
77
EBIT
179
175
175
208
% chg 26.0 (2.5)
0.4
18.4
(% of Net Sales) 10.3 9.6
8.9
9.6
Interest & other Charges
34
48
44
44
Other Income
26
28
28
28
(% of PBT) 15.4 18.3
17.6
14.7
Share in profit of Associates
-
-
-
-
Recurring PBT
171
154
159
191
% chg 26.0 (9.8)
2.9
20.2
Prior Period & Extraordinary Expense/(Inc.)
-
-
-
-
PBT (reported)
171
154
159
191
Tax
60
53
40
48
(% of PBT) 34.8 34.5
25.2
25.2
PAT (reported)
112
101
119
143
Add: Share of earnings of associate
-
-
-
-
ADJ. PAT
112
101
119
143
% chg 26.8 (9.6)
14.1
20.2
(% of Net Sales) 6.4 5.6
6.0
6.6
Basic EPS (`) 24.6 22.3
25.4
30.5
Fully Diluted EPS (`) 24.6 22.3
25.4
30.5
% chg 26.8 (9.6)
14.1
20.2
Siyaram Silk Mills| 2QFY2020 Result Update
October 22, 2019
5
Balance Sheet
Y/E March (` cr)
FY2018
FY2019 FY2020E FY2021E
SOURCES OF FUNDS
Equity Share Capital
9
9 9 9
Reserves& Surplus
669
748
853
979
Shareholders Funds
679
757
862
988
Minority Interest
-
-
-
-
Total Loans
573
444
444
444
Deferred Tax Liability
15
20 20
20
Total Liabilities
1,267
1,221
1,354
1,515
APPLICATION OF FUNDS
Gross Block
582
720
740
760
Less: Acc. Depreciation
143
201
274
351
Net Block
439
519
466
409
Capital Work-in-Progress
93
8 8 8
Investments
33
25 25
25
Current Assets
989
953
1,152
1,355
Inventories
430
421
459
505
Sundry Debtors
422
393
459
564
Cash
23
8 37
69
Loans & Advances
81
105
118
130
Other Assets
33
27 79
87
Current liabilities
286
283
296
282
Net Current Assets
703
670
856
1,073
Deferred Tax Asset
-
-
-
-
Mis. Exp. not written off
-
-
-
-
Total Assets
1,267
1,221
1,354
1,515
Siyaram Silk Mills| 2QFY2020 Result Update
October 22, 2019
6
Cashflow Statement
Y/E March (`cr) FY2018
FY2019
FY2020E
FY2021E
Profit before tax 177
159
159
191
Depreciation 61
62
73
77
Change in Working Capital
(281)
(57)
(157)
(185)
Interest / Dividend (Net) 19
27
44
44
Direct taxes paid -
-
(40)
(48)
Others (4)
(0)
-
-
Cash Flow from Operations
(28)
192
79
79
(Inc.)/ Dec. in Fixed Assets (176)
(12)
(20)
(20)
(Inc.)/ Dec. in Investments (19)
-
-
-
Cash Flow from Investing (158)
(12)
(20)
(20)
Issue of Equity -
-
-
-
Inc./(Dec.) in loans -
(139)
-
-
Dividend Paid (Incl. Tax) 1
(20)
14
17
Interest / Dividend (Net) 204
(35)
(44)
(44)
Cash Flow from Financing 205
(194)
(30)
(27)
Inc./(Dec.) in Cash 19
(15)
29
32
Opening Cash balances 4
23
8
37
Closing Cash balances 23
8
37
69
Siyaram Silk Mills| 2QFY2020 Result Update
October 22, 2019
7
Key ratios
Y/E March FY2018 FY2019
FY2021E
Valuation Ratio (x)
P/E (on FDEPS)
9.1
10.1
8.8
7.3
P/CEPS
23.5
21.2
24.2
29.1
P/BV
1.5
1.4
1.2
1.1
Dividend yield (%)
6.2
5.6
6.4
7.7
EV/Sales
0.9
0.8
0.7
0.6
EV/EBITDA
6.5
6.2
5.8
4.9
EV / Total Assets
1.0
1.0
0.9
0.8
Per Share Data (`)
EPS (Basic)
24.6
22.3
25.4
30.5
EPS (fully diluted)
24.6
22.3
25.4
30.5
Cash EPS
9.5
10.6
9.3
7.7
DPS
13.8
12.5
14.3
17.2
Book Value
144.8
161.7
184.0
210.9
Returns (%)
ROCE
14.3
14.5
13.4
14.5
Angel ROIC (Pre-tax)
15.0
14.9
14.1
15.5
ROE
16.4
13.4
13.8
14.5
Turnover ratios (x)
Asset Turnover (Gross Block)
3.0
2.5
2.7
2.9
Inventory / Sales (days)
91
85
85
85
Receivables (days)
89
79
85
95
Payables (days)
38
35
35
35
Working capital cycle (ex-
cash) (days)
141
128
135
145
Source: Company, Angel Research
Siyaram Silk Mills| 2QFY2020 Result Update
October 22, 2019
8
Research Team Tel: 022
-
39357800 E
-
mail:
research@angelbroking.com Website: www.angelbroking.com
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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
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Reduce (-5% to -15%) Sell (< -15%)
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