For 1QFY2020, Siyaram Silk Mills (SSML) posted subdued results, which were
below our expectations on both top-line and bottom-line fronts. Revenue grew
~1% yoy. On the margin front, the company reported operating margin
improvement by 109bps yoy (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 to ~`10cr due to subdued top-line growth.

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.

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