1QFY2020 Result Update | Textiles
August 16, 2019
Siyaram Silk Mills
BUY
CMP
`235
Performance Update
Target Price
`333
Y/E March (` cr)
1QFY20 1QFY19
% chg (yoy) 4QFY19 % chg (qoq)
Investment Period
12 months
Net sales
326
322
1.2
588
-44.5
Stock Info
EBITDA
38
34
11.7
88
-56.8
Sector
Textiles
EBITDA margin (%)
11.6
10.5
109bp
15.0
(331bp)
Market Cap (` cr)
1,101
Adjusted PAT
10
10
0.7
47
-78.6
Net Debt (` cr)
412
Source: Company, Angel Research
Beta
0.6
For 1QFY2020, Siyaram Silk Mills (SSML) posted subdued results, which were
52 Week High / Low
575/229
below our expectations on both top-line and bottom-line fronts. Revenue grew
Avg. Daily Volume
1,619
~1% yoy. On the margin front, the company reported operating margin
Face Value (`)
2
BSE Sensex
37,350
improvement by 109bps yoy (positive impact mainly due to change in account
Nifty
11,047
policy as per Ind AS-116). On the bottom-line front, SSML reported PAT growth of
Reuters Code
SIYR.BO
~1% yoy to ~`10cr due to subdued top-line growth.
Bloomberg Code
SIYA.IN
Overall top-line remains muted: The company’s top-line grew ~1% yoy to
`326cr. During the quarter, overall slowdown in urban and rural which impacted
Shareholding Pattern (%)
the company’s sales, especially in tier 2 &3 cities, which contribute 70% of SSML’s
Promoters
67.1
revenue.
MF / Banks / Indian
9.7
FII / NRIs / OCBs
1.9
PAT grew flat: On the operating front, the company’s margin improved by
Indian Public/Others
21.3
109bps yoy at 11.6% (positive impact mainly due to change in account policy as
per Ind AS-116). On the bottom-line front, SSML reported PAT growth of ~1% yoy
Abs.(%)
3m
1yr
3yr
Sensex
0.0
(1.4)
32.9
to ~`10cr due to subdued top-line growth.
SSM
(26.2)
(56.9)
(20.0)
Outlook and Valuation: Going forward, we expect SSML to report net sales CAGR
of ~9% to ~`2,173cr and adj. net profit CAGR of ~13% to `130cr 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
Historical share price chart
market prices, SSML trades at inexpensive valuations. We maintain our Buy
900
800
recommendation on the stock with a Target Price of `333.
700
600
Key Financials
500
400
Y/E March (` cr)
FY2018
FY2019
FY2020
FY2021
300
Net sales
1,733
1,815
1,975
2,173
200
100
% chg
10.1
4.7
8.9
10.0
0
Adj. Net profit
111
101
115
130
% chg
115.0
101.2
114.8
129.9
EBITDA margin (%)
14.2
13.0
13.2
13.2
Source: Company, Angel Research
EPS (`)
24.5
21.6
24.5
27.7
P/E (x)
9.6
10.9
9.6
8.5
Amarjeet S Maurya
P/BV (x)
1.6
1.5
1.3
1.1
022-40003600 Ext: 6831
RoE (%)
18.1
13.4
13.4
13.4
RoCE (%)
14.8
14.5
14.4
14.8
EV/Sales (x)
0.9
0.8
0.8
0.7
EV/EBITDA (x)
6.6
6.4
5.7
5.1
Source: Company, Angel Research Note: CMP as of August 16, 2019
Please refer to important disclosures at the end of this report
1
Siyaram Silk Mills| 1QFY2020 Result Update
Exhibit 1: 1QFY2020 Performance
Y/E March (` cr)
1QFY20
1QFY19
% chg. (yoy)
4QFY19
% chg. (qoq)
FY2019
FY2018
% chg
Net Sales
326
322
1
588
(44.5)
1,815
1,733
4.7
Net raw material
132.4
128
3.7
284.6
(53.5)
806
774
4.2
(% of Sales)
40.6
39.7
98
48.4
(781)
44.4
44.7
Employee Cost
47
47
0.8
50
(5.6)
198
190
4.2
(% of Sales)
14.4
14.4
(6)
8.5
593
10.9
11.0
Other Expenses
109
114
(4.6)
165
(34.3)
574
530
8.5
(% of Sales)
33.3
35.4
(202)
28.1
519
31.7
30.6
Total Expenditure
288
288
(0.0)
500
(42.4)
1,578
1,493
5.7
Operating Profit
38
34
11.7
88
(56.8)
237
240
(1.3)
OPM (%)
11.6
10.5
110
15.0
(332)
13.0
13.8
(80)
Interest
11
11
(0.1)
12
(6.2)
48.4
34.2
41.4
Depreciation
18
16
17.3
15
20.5
61.9
60.6
2.2
Other Income
7
8
(15.5)
7
(6.3)
28.3
26.3
7.3
PBT before exceptional
15
15
0.7
68
(77.6)
154
171
(9.8)
(% of Sales)
4.7
4.7
11.6
8.5
9.9
Exceptional Items
-
-
PBT
15
15
0.7
68
(77.6)
154.5
171.3
(9.8)
Tax
5
5
0.6
21
(75.3)
53.3
59.7
(10.6)
(% of PBT)
34.5
34.5
31.3
34.5
34.8
Reported PAT
10
10
0.7
47
(78.6)
101
112
(9.3)
PATM
3.1
3.1
8.0
5.6
6.4
Extra-ordinary Items
-
-3
-4
Adj PAT
10
10
0.7
47
(78.6)
104
115
(9.6)
Source: Company
August 16, 2019
2
Siyaram Silk Mills| 1QFY2020 Result Update
Outlook and Valuation
Going forward, we expect SSML to report net sales CAGR of ~9% to ~`2,173cr
and adj. net profit CAGR of ~13% to `130cr 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.
August 16, 2019
3
Siyaram Silk Mills| 1QFY2020 Result Update
Profit & Loss Statement
Y/E March (` cr)
FY2018
FY2019
FY2020E
FY2021E
Total operating income
1,733
1,815
1,975
2,173
% chg
10.1
4.7
8.9
10.0
Total Expenditure
1,488
1,578
1,715
1,886
Cost of Materials
774
806
841
926
Personnel
190
198
233
256
Others Expenses
524
574
640
704
EBITDA
245
237
261
287
% chg
24.8
(3.6)
10.3
10.0
(% of Net Sales)
14.2
13.0
13.2
13.2
Depreciation& Amortisation
61
62
73
77
EBIT
185
175
188
210
% chg
30.0
(5.6)
7.5
12.0
(% of Net Sales)
10.7
9.6
9.5
9.7
Interest & other Charges
34
48
44
44
Other Income
26
28
28
28
(% of PBT)
14.9
18.3
16.3
14.4
Share in profit of Associates
-
-
-
-
Recurring PBT
177
154
171
194
% chg
30.2
(12.7)
10.9
13.2
Prior Period & Extraordinary Expense/(Inc.)
(6)
-
-
-
PBT (reported)
183
154
171
194
Tax
60
53
57
64
(% of PBT)
32.8
34.5
33.0
33.0
PAT (reported)
123
101
115
130
Add: Share of earnings of associate
-
-
-
-
ADJ. PAT
117
101
115
130
% chg
26.4
(12.0)
13.4
13.2
(% of Net Sales)
6.8
5.6
5.8
6.0
Basic EPS (`)
24.5
21.6
24.5
27.7
Fully Diluted EPS (`)
24.5
21.6
24.5
27.7
% chg
26.4
(12.0)
13.4
13.2
August 16, 2019
4
Siyaram Silk Mills| 1QFY2020 Result Update
Balance Sheet
Y/E March (` cr)
FY2018
FY2019
FY2020E
FY2021E
SOURCES OF FUNDS
Equity Share Capital
9
9
9
9
Reserves& Surplus
669
748
849
963
Shareholders Funds
679
757
858
973
Minority Interest
-
-
-
-
Total Loans
573
444
444
444
Deferred Tax Liability
15
20
20
20
Total Liabilities
1,267
1,221
1,350
1,495
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
1,148
1,336
Inventories
430
421
460
506
Sundry Debtors
422
393
460
566
Cash
23
8
30
47
Loans & Advances
81
105
119
130
Other Assets
33
27
79
87
Current liabilities
286
283
297
283
Net Current Assets
703
670
851
1,053
Deferred Tax Asset
-
-
-
-
Mis. Exp. not written off
-
-
-
-
Total Assets
1,267
1,221
1,350
1,495
August 16, 2019
5
Siyaram Silk Mills| 1QFY2020 Result Update
Consolidated Cashflow Statement
Y/E March (`cr)
FY2018
FY2019
FY2020E
FY2021E
Profit before tax
136
177
172
218
Depreciation
177
159
171
194
Change in Working Capital
61
62
73
77
Interest / Dividend (Net)
(281)
(57)
(159)
(185)
Direct taxes paid
19
27
44
44
Others
-
-
(57)
(64)
Cash Flow from Operations
(4)
(0)
-
-
(Inc.)/ Dec. in Fixed Assets
(28)
192
73
66
(Inc.)/ Dec. in Investments
(176)
(12)
(20)
(20)
Cash Flow from Investing
(19)
-
-
-
Issue of Equity
(158)
(12)
(20)
(20)
Inc./(Dec.) in loans
-
-
-
-
Dividend Paid (Incl. Tax)
-
(139)
-
-
Interest / Dividend (Net)
1
(20)
14
16
Cash Flow from Financing
204
(35)
(44)
(44)
Inc./(Dec.) in Cash
205
(194)
(31)
(29)
Opening Cash balances
19
(15)
22
17
Closing Cash balances
4
23
8
30
August 16, 2019
6
Siyaram Silk Mills| 1QFY2020 Result Update
Key ratios
Y/E March
FY2018
FY2019
FY2020E
FY2021E
Valuation Ratio (x)
P/E (on FDEPS)
9.6
10.9
9.6
8.5
P/CEPS
17.5
15.4
17.4
19.7
P/BV
1.6
1.5
1.3
1.1
Dividend yield (%)
5.9
5.2
5.9
6.6
EV/Sales
0.9
0.8
0.8
0.7
EV/EBITDA
6.6
6.4
5.7
5.1
EV / Total Assets
1.0
1.0
0.9
0.8
Per Share Data (`)
EPS (Basic)
24.5
21.6
24.5
27.7
EPS (fully diluted)
24.5
21.6
24.5
27.7
Cash EPS
13.4
15.3
13.5
11.9
DPS
13.8
12.1
13.8
15.6
Book Value
144.8
161.7
183.2
207.6
Returns (%)
ROCE
14.8
14.5
14.4
14.8
Angel ROIC (Pre-tax)
15.5
14.9
15.0
15.6
ROE
18.1
13.4
13.4
13.4
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
August 16, 2019
7
Siyaram Silk Mills| 1QFY2020 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 16, 2019
8
