For 2QFY2019, Siyaram Silk Mills (SSML) posted subdued set of results, which were below our expectations on both, top-line as well as bottom-line fronts. Revenue grew ~9% yoy. On the margin front, the company reported operating margin contraction by 173bps yoy. On the bottom-line front, SSML reported de-growth of ~11% yoy to ~`27cr due to subdued top-line growth.

Outlook and Valuation: Going forward, we expect SSML to report net sales CAGR of ~12% to ~`2,166cr and adj. net profit CAGR of ~13% to `147cr over FY2018-20E 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 `549.

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