3QFY2018 Result Update | Cable

February 2, 2018

Siyaram Silk Mills

BUY

CMP

`627

Performance Update

Target Price

`813

Y/E March (` cr)

3QFY18

3QFY17

% yoy

2QFY18

% qoq

Investment Period

12 month

Net sales

394

339

16.1

428

(8.1)

EBITDA

20.3

(28.0)

Stock Info

EBITDA margin (%)

12.8

12.4

45bp

16.3

(353bp)

Sector

Cable

Adjusted PAT

64.1

30.7

(27.0)

Market Cap (Rs cr)

2,939

Source: Company, Angel Research

Net Debt

314

For 3QFY2018, Siyaram Silk Mills (SSM) posted good set of results, exceeding our

Beta

0.6

52 Week High / Low

799/287

expectations on both, top-line as well as bottom-line fronts. Revenues grew by

Avg. Daily Volume

2,781

~16% yoy (above our estimate). On the operating front, the company reported

Face Value (Rs)

operating margin improvement. On the bottom-line front, SSM reported growth of

BSE Sensex

35,067

Nifty

10,761

~64% yoy to `22cr on the back of strong top-line growth, higher other income and

Reuters Code

SIYR.BO

lower taxes.

Bloomberg Code

SIYA IN

Top-line driven by strong volume growth: The Company’s top-line grew by ~16%

yoy to `394cr on the back of strong growth in volume and price hike.

Shareholding Pattern (%)

Strong revenue growth and operating performance boost overall profitability: On

Promoters

67.1

the operating front, the company’s margin has improved by 45bbp yoy at 12.8%.

MF / Banks / Indian Fls

9.4

The company reported ~64% yoy rise in its net profit to `22cr on the back of strong

FII / NRIs / OCBs

1.7

revenue growth, higher other income and lower taxes.

Indian Public / Others

21.8

Outlook and Valuation: Going forward, we expect SSML to report a net sales CAGR

of ~12% to ~`1,981cr and adj.net profit CAGR of ~16% to `126cr over FY2017-

Abs. (%)

3m 1yr 3yr

19E on back of market leadership in blended fabrics, strong brand building, wide

Sensex

6.9

27.6

23.3

distribution channel, strong presence in tier II and tier III cities and emphasis on

SSM

11.1

130.5

232.0

latest designs and affordable pricing points. At the current market price, SSML

trades at an inexpensive valuation. We have a buy recommendation on the stock

and target price of `813.

Historical share price chart

Key Financials

900

800

Y/E March (` cr)

FY2016

FY2017

FY2018E

FY2019E

700

600

Net sales

1,619

1,574

1,769

1,981

500

% chg

7.2

(2.8)

12.4

12.0

400

300

Adj. Net profit

108

126

200

% chg

87.6

91.0

108.2

125.5

100

EBITDA margin (%)

11.6

12.5

13.0

EPS (`)

18.7

19.4

23.1

26.8

P/E (x)

35.3

33.9

28.5

24.6

P/BV (x)

6.0

5.2

4.5

3.9

Source: Company, Angel Research

RoE (%)

17.1

15.4

15.7

Amarjeet S Maurya

RoCE (%)

16.3

14.3

15.8

16.5

022-40003600 Ext: 6831

EV/Sales (x)

2.1

2.2

1.9

1.7

[email protected]

EV/EBITDA (x)

18.2

17.3

14.8

12.9

Source: Company, Angel Research Note: CMP as of February 02, 2018

Please refer to important disclosures at the end of this report

KEI Industries| 3QFY2018 Result Update

Exhibit 1: 3QFY2018 Performance

Y/E March (` cr) 3QFY18 3QFY17% chg (yoy) 2QFY18% chg (qoq) 9MFY18 9MFY17 % chg

Net Sales

394

339

16.1

428

(8.1)

1,137

1,045

8.8

Net raw material

163.2

141

15.9

182.29

(10.5)

474.3

472.19

0.4

(% of Sales)

41.5

41.6

(9)

42.6

(110)

41.7

45.2

Employee Cost

11.5

1.4

138

124

11.2

(% of Sales)

12.0

12.5

(50)

10.9

112

12.1

11.9

Other Expenses

133

114

16.6

129

2.6

377

325

15.8

(% of Sales)

33.7

33.6

30.2

351

33.1

31.1

Total Expenditure

343

297

15.5

358

(4.2)

989

922

7.3

Operating Profit

20.3

(28.0)

148

124

OPM (%)

12.8

12.4

16.3

(353)

13.00

11.82

118

Interest

2.2

38.5

26 (14.4)

Depreciation

(10.9)

(3.4)

5.2

Other Income

44.4

#DIV/0!

(2.4)

PBT

57.7

(28.7)

34.6

(% of Sales)

8.7

6.4

11.2

8.6

7.0

Tax

46.9

(31.7)

35.3

(% of PBT)

34.4

36.9

35.9

35.4

35.2

Reported PAT

64.1

(27.0)

34.3

PATM

5.7

4.0

7.2

5.6

4.5

Source: Company, Angel Research

February 2, 2018

Siyaram Silk Mills| 3QFY2018 Result Update

Outlook and Valuation

Going forward, we expect SSML to report a net sales CAGR of ~12% to ~`1,981cr

and adj.net profit CAGR of ~16% to `126cr over FY2017-19E on 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 price, SSML trades at an inexpensive

valuation. We have a buy recommendation on the stock and target price of `813.

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.

February 2, 2018

Siyaram Silk Mills| 3QFY2018 Result Update

Profit & Loss Statement

Y/E March (` cr)

FY2016

FY2017

FY2018E

FY2019E

Total operating income

1,619

1,574

1,769

1,981

% chg

7.2

(2.8)

12.4

12.0

Total Expenditure

1,432

1,377

1,539

1,724

Cost of Materials

810

739

934

1,046

Personnel

144

169

150

168

Others Expenses

478

470

455

509

EBITDA

188

197

230

258

% chg

7.8

4.8

16.9

12.0

(% of Net Sales)

11.6

12.5

13.0

Depreciation& Amortisation

EBIT

146

142

172

197

% chg

9.6

(2.7)

20.6

15.0

(% of Net Sales)

9.0

9.7

10.0

Interest & other Charges

Other Income

(% of PBT)

12.9

18.8

13.6

11.7

Share in profit of Associates

Recurring PBT

133

136

162

187

% chg

11.6

2.4

18.8

16.0

Prior Period & Extraordinary Expense/(Inc.)

PBT (reported)

133

136

162

187

Tax

(% of PBT)

34.0

33.1

33.0

PAT (reported)

108

126

Add: Share of earnings of associate

ADJ. PAT

108

126

% chg

11.1

3.9

18.9

16.0

(% of Net Sales)

5.4

5.8

6.1

6.3

Basic EPS (`)

18.7

19.4

23.1

26.8

Fully Diluted EPS (`)

18.7

19.4

23.1

26.8

% chg

11.1

3.9

18.9

16.0

February 2, 2018

Siyaram Silk Mills| 3QFY2018 Result Update

Balance Sheet

Y/E March (` cr)

FY2016

FY2017

FY2018E

FY2019E

SOURCES OF FUNDS

Equity Share Capital

Reserves& Surplus

503

583

678

788

Shareholders Funds

512

592

687

798

Minority Interest

Total Loans

386

400

Deferred Tax Liability

Total Liabilities

920

1,015

1,110

1,220

APPLICATION OF FUNDS

Gross Block

609

639

659

679

Less: Acc. Depreciation

299

354

412

472

Net Block

310

286

247

207

Capital Work-in-Progress

Investments

Current Assets

774

853

1,002

1,181

Inventories

326

336

388

434

Sundry Debtors

368

367

422

472

Cash

112

Loans & Advances

106

119

Other Assets

Current liabilities

221

182

196

219

Net Current Assets

553

671

806

962

Deferred Tax Asset

Mis. Exp. not written off

Total Assets

920

1,015

1,110

1,220

February 2, 2018

Siyaram Silk Mills| 3QFY2018 Result Update

Consolidated Cashflow Statement

Y/E March (` cr)

FY2016

FY2017

FY2018E

FY2019E

Profit before tax

133

136

162

187

Depreciation

Change in Working Capital

(127)

(86)

(127)

(91)

Interest / Dividend (Net)

Direct taxes paid

(45)

(53)

(62)

Others

Cash Flow from Operations

127

(Inc.)/ Dec. in Fixed Assets

(112)

(30)

(20)

(Inc.)/ Dec. in Investments

(46)

Cash Flow from Investing

(66)

(30)

(20)

Issue of Equity

Inc./(Dec.) in loans

Dividend Paid (Incl. Tax)

Interest / Dividend (Net)

(52)

(55)

(60)

Cash Flow from Financing

(28)

(44)

(41)

Inc./(Dec.) in Cash

Opening Cash balances

Closing Cash balances

112

February 2, 2018

Siyaram Silk Mills| 3QFY2018 Result Update

Key ratios

Y/E March

FY2016

FY2017

FY2018E

FY2019E

Valuation Ratio (x)

P/E (on FDEPS)

35.3

33.9

28.5

24.6

P/CEPS

18.7

19.4

23.1

26.8

P/BV

6.0

5.2

4.5

3.9

Dividend yield (%)

1.6

1.7

2.0

2.3

EV/Sales

2.1

2.2

1.9

1.7

EV/EBITDA

18.2

17.3

14.8

12.9

EV / Total Assets

3.0

2.8

2.6

2.3

Per Share Data (Rs)

EPS (Basic)

18.7

19.4

23.1

26.8

EPS (fully diluted)

18.7

19.4

23.1

26.8

Cash EPS

35.3

33.9

28.5

24.6

DPS

10.5

10.9

13.0

15.1

Book Value

109.3

126.4

146.7

170.3

Returns (%)

ROCE

16.3

14.3

15.8

16.5

Angel ROIC (Pre-tax)

17.3

15.7

17.3

19.0

ROE

17.1

15.4

15.7

Turnover ratios (x)

Asset Turnover (Gross Block)

2.7

2.5

2.7

2.9

Inventory / Sales (days)

Receivables (days)

Payables (days)

Working capital cycle (ex-cash) (days)

123

131

136

Source: Company, Angel Research

February 2, 2018

Siyaram Silk Mills| 3QFY2018 Result Update

Research Team Tel: 022 - 39357800

E-mail: [email protected]

Website: www.angelbroking.com

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Disclosure of Interest Statement

Siyaram Silk Mills

1. Analyst ownership of the stock

2. Angel and its Group companies ownership of the stock

3. Angel and its Group companies' Directors ownership of the stock

4. Broking relationship with company covered

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%)

February 2, 2018