Siyaram Silk Mills (SSML)’ results for 3QFY2017 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 ~7% to ~Rs1,857cr and adj. net profit CAGR of ~9% to Rs103cr 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 13.1x
its FY2018E earnings). We recommend an Accumulate rating on the stock with
the target price of Rs1,605.

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