Results in line, Expect Slower Margin recovery;
Reiterate “BUY” on Attractive Valuations
Siyaram Silk Mills (SSML) sales grew 8% while EBITDA and net income
declined by 9% and 24% YoY respectively during Q4FY13. For the year FY13;
sales grew 14% while EBITDA and net income declined 5% and 3%
respectively on subdued demand.
Revenue Growth: The Company’s top‐line grew 8% YoY to Rs. 2,896 mn (our
expectations Rs. 2,828 mn) during Q4FY13, while sequential growth was
registered at 4%. Amid stable realizations on challenging consumer behavior,
revenue growth is largely attributable to well maintained volume thrust.
Operating margins under pressure: The Company’s EBITDA declined 9%
YoY to Rs. 298 mn (our expectations Rs. 302 mn) during Q4FY13 on account
of higher staff and sales & promotional expenses. EBITDA margins for the
quarter slipped 194bps YoY to 10.3%. Net Income for Q4FY13 declined 23.8%
YoY to Rs. 130 mn (our expectations Rs. 137 mn) on higher tax payments
with effective tax rate of 39% for Q4FY13.
SSMLs total capex plan of 20 MMPA fabrics and 7.2 lac pcs per annum of
readymade garments, ~10MMPA and ~1.8 lac pcs capacity has been installed
while remaining expansion is slowed down keeping in view of the subdued
consumer demand. Also, during Q4FY13, the Company added ~25 stores to
reach approx. 165 stores. SSML is looking to expand its retail stores with ~90
stores additions in FY14 while aiming ~500 stores in the next 4‐5 years.
We revised our sales by 0.5% and 1.8% and EBITDA marginally by (1.2%)
and 0.1% for FY14E and FY15E respectively. Expected net income has been
revised by (0.9%) and 3.3% for FY14E and FY15E respectively, factoring in
higher tax rate going forward.
Outlook & Valuation
SSML’s revenue and net income are expected to grow at a CAGR of 18% and
22%, respectively over FY13‐15E. At CMP of Rs. 261, the stock trades
attractively at 3.0x and 3.3x FY15E EPS and EV/EBITDA respectively. We
reiterate our “BUY” recommendation with revised target of Rs. 390 (Rs. 344),
valuing at 4.5x FY15E EPS and 4.0x FY15E EV/EBITDA, which has a potential
upside of 49%.
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Reiterate “BUY” on Attractive Valuations
Siyaram Silk Mills (SSML) sales grew 8% while EBITDA and net income
declined by 9% and 24% YoY respectively during Q4FY13. For the year FY13;
sales grew 14% while EBITDA and net income declined 5% and 3%
respectively on subdued demand.
Revenue Growth: The Company’s top‐line grew 8% YoY to Rs. 2,896 mn (our
expectations Rs. 2,828 mn) during Q4FY13, while sequential growth was
registered at 4%. Amid stable realizations on challenging consumer behavior,
revenue growth is largely attributable to well maintained volume thrust.
Operating margins under pressure: The Company’s EBITDA declined 9%
YoY to Rs. 298 mn (our expectations Rs. 302 mn) during Q4FY13 on account
of higher staff and sales & promotional expenses. EBITDA margins for the
quarter slipped 194bps YoY to 10.3%. Net Income for Q4FY13 declined 23.8%
YoY to Rs. 130 mn (our expectations Rs. 137 mn) on higher tax payments
with effective tax rate of 39% for Q4FY13.
SSMLs total capex plan of 20 MMPA fabrics and 7.2 lac pcs per annum of
readymade garments, ~10MMPA and ~1.8 lac pcs capacity has been installed
while remaining expansion is slowed down keeping in view of the subdued
consumer demand. Also, during Q4FY13, the Company added ~25 stores to
reach approx. 165 stores. SSML is looking to expand its retail stores with ~90
stores additions in FY14 while aiming ~500 stores in the next 4‐5 years.
We revised our sales by 0.5% and 1.8% and EBITDA marginally by (1.2%)
and 0.1% for FY14E and FY15E respectively. Expected net income has been
revised by (0.9%) and 3.3% for FY14E and FY15E respectively, factoring in
higher tax rate going forward.
Outlook & Valuation
SSML’s revenue and net income are expected to grow at a CAGR of 18% and
22%, respectively over FY13‐15E. At CMP of Rs. 261, the stock trades
attractively at 3.0x and 3.3x FY15E EPS and EV/EBITDA respectively. We
reiterate our “BUY” recommendation with revised target of Rs. 390 (Rs. 344),
valuing at 4.5x FY15E EPS and 4.0x FY15E EV/EBITDA, which has a potential
upside of 49%.
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