For 2QFY2020, Siyaram Silk Mills (SSML) posted results in-line with our
expectations on both top-line and bottom-line fronts. Revenue grew ~6% yoy. On
the margin front, the companys operating margin contracted by 217bps yoy. On
the bottom-line front, SSML reported PAT growth of ~23% yoy to ~`30cr due to
lower taxes.
Outlook and Valuation: Going forward, we expect SSML to report net sales CAGR
of ~9% to ~`2,168cr and adj. net profit CAGR of ~13% to `143cr 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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