Buy Siyaram Silk Mills, target price Rs 559: HDFC Securities

HDFC Securities has buy call on Siyaram Silk Mills with a target price of Rs 559. The current market price of Siyaram Silk Mills is Rs 451.9. Time period given by analyst is six months when Siyaram Silk Mills Ltd. price can reach defined target.

Siyaram Silk Mills Ltd., incorporated in the year 1978, is a Small Cap company (having a market cap of Rs 2122.04 Crore) operating in Textiles sector.

Siyaram Silk Mills Ltd. key Products/Revenue Segments include Textiles, Job Work and Other Operating Revenue for the year ending 31-Mar-2021.


Financials
For the quarter ended 30-09-2021, the company reported a Consolidated Total Income of Rs 486.87 Crore, up 102.25 % from last quarter Total Income of Rs 240.73 Crore and up 161.77 % from last year same quarter Total Income of Rs 185.99 Crore. Company reported net profit after tax of Rs 52.89 Crore in latest quarter.

Investment Rationale
Going forward, the brokerage is positive on the future growth prospects of SSML and it expects it to be a key beneficiary of the unorganized to organized shift in a highly fragmented textile and apparel industry. The shift from un-organized players to organized is a big opportunity as many smaller un-organized players have been impacted by liquidity and survival issues, which can lead to a sustainable tailwind resulting in market share gains for larger organized players like SSML. Further it aims to improve its efficiency and improve its working capital requirements by reducing its exposure to the consignment driven modern trade segment (for the branded apparels business) which is highly working capital intensive. SSML’s core strategy is to consistently invest behind its brands, enhance its product mix and have a deeper penetration thereby leveraging its distribution network in the traditional retail channels. Margins may dip a bit going forward as there could be some normalization of marketing spend. Also the low cost inventory benefit enjoyed by the company in Q2FY22 may not be available going forward. SSML’s revenue and EBITDA is likely to record a growth of 23% and 73% CAGR over FY21-24E while PAT for FY24E is likely to reach Rs. 183Cr v/s Rs. 3.5Cr in FY21 and Rs.69Cr in FY20. Along with this, the brokerage expects the company to benefit from strong operating leverage and generate consistent FCF with improvement in working capital and ROCE from 7% in FY20 to 19% by FY24E.

Promoter/FII Holdings
Promoters held 67.19 per cent stake in the company as of 30-Sep-2021, while FIIs owned 1.94 per cent, DIIs 10.75 per cent.