Siyaram Silk Mills (SSML)’ results for 2QFY2017 have come in below our
estimates, both on top-line and bottom-line front, on back of lower volume
growth due to weak consumer buying sentiments. Going forward, we expect SSML to report net sales CAGR
of ~10% to ~Rs1,948cr and adj. net profit CAGR of ~11% to Rs107cr over
FY2016-18E. The same would be on the back of market leadership in blended
fabrics, strong branding, wide distribution channel, strong presence in tier II and
tier III cities, and emphasis on latest designs at affordable pricing points. At the
current market price, SSML trades at an inexpensive valuation (at a P/E of 10.4x
its FY2018E earnings). We recommend a Buy rating on the stock with the target
price of Rs1,605.

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