Textiles & Apparel

November 13, 2014

Siyaram Silk Mills

India Research Stock Broking

RESULT REVIEW

Bloomberg Code: SIYA IN

HOLD
Recommendation (Rs)

Optimal Product-Mix & Demand to drive Growth

Siyaram Silk Mills (SSML) sales, EBITDA and net income grew 18%, 23% and 19%
YoY respectively during Q2FY15. EBITDA margin increased by 58bps YoY on
account of stable raw material prices and new product launches. Going forward,
management is optimistic on maintaining its margins on stabilizing raw-material
costs, optimized product mix & higher turnover on capex.
Revenue growth fuelled by Capex: SSML carried out capacity expansion at
capital expenditure of Rs 2200 mn, by adding 200 looms and 110 machines for
ready-made garments over the last three years. This boosted its weaving and
garment capacities by 20 MMPA and 0.6 mn pieces per annum, respectively. The
companys top-line grew 18% YoY to Rs. 3,980 mn during Q2FY15 due to
enhanced product (linen) mix & improvement in realizations by ~4%. However,
due to challenging consumer sentiments, we expect price hike by ~5% over the
next 4-5 quarters.
EBITDA margins improving on stabilized raw material costs: SSMLs Operating
margin was under pressure for 4-5 quarters on subdued consumer demand and
inability to pass on rise in input costs. However, during Q2FY15, margins
improved despite no price hike. Going forward, we expect the margins to grow
by a similar trend owing to stable raw material prices.
Strong growth in Garments to continue: SSMLs garment segment grew by 37%
YoY due to higher exports. We expect the segment to register a growth of 23%
CAGR during FY14-17E, led by strong brand positioning. Capacity expansion is
expected to drive top-line growth in the fabric segment in the coming quarters.

Valuation and Outlook

CMP

860

Target Price

964

Previous Target Price

745

Upside (%)

12

Stock Information
Mkt Cap (Rs.mn/US$ mn)

8122/132

52-wk H/L (Rs)

877/224.9

3M ADV (mn)

0.02

Beta (x)

1.28
28047/8390

Sensex/Nifty

9.37

O/S Shares (mn)

Shareholding Pattern (%)

Promoter

67.1

Public

26.2

Banks/MF & Others

6.6

FII

0.2

Stock Performance (%)

1M

3M

6M

12M

Absolute

19.8 64.2

273

211.6

Relative to Sensex

12.5 52.8 85.3

170.9

Performance
500

Jun/14

Apr/14

Aug/14

Sensex

Feb/14

Dec/13

Oct/13

0
Aug/13

SSMLs revenue and net income are expected to grow at a CAGR of 23% and 33%,
respectively over FY14-17E. At CMP, the stock is valued at 7.0x and 5.4x FY16E
and FY17E earnings respectively.We remain positive on SSML and recommend
HOLD on strong financials, superior return ratios and inviting valuations with
a target price of 961 based on 6x FY17E earnings, representing an upside potential
of 12%.

Siyaram

Source: Bloomberg

Exhibit 1: Valuation Summary (Rs.

Mn)

YE Mar (Rs Million)

FY13

FY14

FY15E

FY16E

FY17E

Net Sales

10413

13034

15876

19455

23949

EBIDTA

1102

1401

1738

2169

2694

EBIDTA %

10.6

10.7

11.0

11.2

11.3

Adj Net Profit

550

636

850

1151

1506

EPS (Rs.)

59

68

91

123

161

RoE (%)

18.9

18.6

20.9

23.2

24.3

P/E (x)

14.7

12.7

9.5

7.0

5.4

Analyst Contact
Varun Chakri
040- 4485 7891
[email protected]

Source: Company, Karvy Research

For private circulation only. For important information about Karvys rating system and other disclosures refer to the end of this
material. Karvy Stock Broking is also available on Bloomberg, KRVY<GO>, Thomson Publishers & Reuters

Oct 00, 2014

Company Name

Exhibit 2: Q2 FY15 Financials

YE Mar (Rs. Millions)

Q2 FY15

Q1 FY15

QoQ %

Q2 FY14

YoY %

Turnover

3980

3021

31.7

3385

17.6

Expenditure

3490

2699

29.3

2988

16.8

EBIDTA

490

322

52.4

397

23.4

Depreciation

102

108

(5.6)

74

38.0

Interest

78

79

(2.1)

73

6.9

Other Income

37

37

0.8

37

(0.8)

PBT

347

171

103.6

288

20.6

Tax

127

55

131.8

103

23.5

PAT

220

116

90.2

185

19.0

Minority Interest
Adjusted PAT

220

116

90.2

185

19.0

EBIDTA (%)

12.3

10.6

167

12 Bps

58 Bps

Net profit (%)

5.5

3.8

170

6 Bps

7 Bps

Source: Company, Karvy Research

Exhibit 3: Quarterly Segmental Revenue Break-up

Q2FY14 (Sep-13)
Bed Linen
2%
Yarn
3%

Q2FY15 (Sep-14)
Others
2%

SKD
1%

Bed Linen SKD

3%
1%
Yarn
3% Garments
20%

Garments
17%

Fabric
72%

Fabric
75%

Source: Company, Karvy Research

Others
1%

Source: Company, Karvy Research

November 13, 2014

Siyaram Silk Mills

Exhibit 4: Segmental Financials

Segment-wise revenues (Rs. Millions)

Q2FY15

Q1FY15

QoQ %

Q2FY14

YoY %

Fabric

4978

2172

129.2

4433

12.3

Readymade Garments

1367

539

153.6

1001

36.6

Yarn

216

99

118.2

188

14.9

Bed Linen

101

35

188.6

96

5.2

SKD (Salwar Kameez)

231

138

67.4

80

188.8

Others

66

32

106.3

89

(25.8)

Fabric (Mtr)

361

164

119.7

362

(0.3)

Readymade Garments (Nos.)

19

106.2

17

9.4

Yarn (Kg)

119.8

11.0

Bed Linen (Mtr)

167.7

(7.2)

Volume (mn)

SKD (Salwar Kameez) (Nos.)

74.9

155.2

Others

12

122.2

16

(21.9)

Fabric

138.1

132.3

4.3

122.5

12.7

Readymade Garments

739.0

600.9

23.0

591.7

24.9

Yarn

235.0

235.1

(0.1)

226.7

3.6

Bed Linen

244.3

224.1

9.0

215.0

13.6

SKD (Salwar Kameez)

466.8

488.8

(4.5)

413.0

13.0

NA

NA

Realizations(Rs. /unit)

Others
Source: Company, Karvy Research

Exhibit 5: Financials
Adjusted Financials (Rs. Mn)

Adj. Mar'14

Mar 15E

Mar 16E

Mar 17E

Net Sales

13034

15876

19455

23949

EBIDTA

1401

1738

2169

2694

EBIDTA margin (%)

10.7

11.0

11.2

11.3

Adj. Net profit

636

850

1151

1506

EPS(Rs.)

68

91

123

161

15.6

33.7

35.4

30.8

YoY growth (%)

Source: Company, Karvy Research

November 13, 2014

Siyaram Silk Mills

Quarterly Performance
SSMLs top-line grew 31.7% YoY to Rs. 3,980 mn during Q2FY15 on back
of added capacities in fabric & garmenting divisions and enhanced
product mix. Fabric, Readymade garments, Yarn, Bed Linen & SKD
grew by 12%, 37%, 15%, 5% & 189% YoY on account of higher volume &
value realizations. EBITDA margin for the quarter increased by 58bps to
12.3% owing to stable input costs & new launches. Consequentially,
EBITDA grew 23% YoY to Rs. 490 mn. Net income grew 19% YoY to Rs.
220 mn.

Exhibit 6: Quarterly Performance

(Rs Mn)

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

QoQ (%)

YoY (%)

2,788
2,476
312
11.2
33
79
56
210
72
34.3
138

2,896
2,599
298
10.3
28
51
61
213
84
39.2
130

2,511
2,252
258
10.3
37
66
68
162
54
33.6
107

3,385
2,988
397
11.7
37
73
74
288
103
35.7
185

3,080
2,766
314
10.2
44
70
74
214
73
34.0
141

4,058
3,627
431
10.6
40
79
76
317
115
36.2
202

3,021
2,699
322
10.6
37
79
108
171
55
32.1
116

3,980
3,490
490
12.3
37
78
102
347
127
36.6
220

31.7
29.3
52.4
167
0.8
(2.1)
(5.6)
103.6
131.8
445
90.2

17.6
16.8
23.4
58
(0.8)
6.9
38.0
20.6
23.5
86
19.0

Revenue
Operating Costs
EBIDTA
EBIDTA Margin (%)
Other Income
Interest
Depreciation
Profit Before Tax
Tax
Tax Rate (%)
Rep. PAT
Source: Company, Karvy Research

We expect better operating environment with moderate recovery in

EBITDA margins over FY15E-FY17E period with stabilizing raw
material prices and expansion benefits kicking in. According to the
management, there would be a minimal capex of Rs. 100mn for the
year. It plans to spend Rs.200mn-Rs.300mn of capex for the next year.
Moreover, its retail expansion would help to connect better with
consumers on higher brand visibility. SSML is looking to expand its
retail stores under franchisee model with ~100 stores additions YoY;
aiming ~500 stores in the next 4-5 years from the existing network of
180 stores.

Exhibit 7: Quarterly revenue break-up (Rs. Mn)

Exhibit 8: Segmental margin trend (Rs. Mn)

10000

500

8000

400

6000

11.2%

10.3%
10.3%

300

4000
200

2000

100

Fabric

Garments

Yarn

Bed Linen

SKD

Others

Source: Company, Karvy Research

EBITDA

10.2%
11.7%

10.6%
10.6%

12.5%
12.3% 10.5%
8.5%
6.5%
4.5%
2.5%
0.5%
-1.5%

EBITDA margin (%)

Source: Company, Karvy Research

November 13, 2014

Siyaram Silk Mills

Financials
Exhibit 09: Income Statement
YE Mar (Rs. Million)

FY13

FY14

FY15E

FY16E

FY17E

Revenues

10413

13034

15876

19455

23949

Growth (%)

13.7

25.2

21.8

22.5

23.1

Operating Expenses

9311

11633

14137

17286

21255

EBIDTA

1102

1401

1738

2169

2694

Growth (%)

(5.4)

27.1

24.1

24.8

24.2

Depreciation & Amortization

218

292

322

335

351

Other Income

185

158

120

120

120

EBIT

884

1110

1417

1835

2343

Interest Expenses

252

287

268

237

216

PBT

818

980

1269

1718

2248

Tax

268

345

419

567

742

Adjusted PAT

550

636

850

1151

1506

Growth (%)

(3.0)

15.6

33.7

35.4

30.8

FY13

FY14

FY15E

FY16E

FY17E

33

56

40

107

Sundry Debtors

2004

2601

2937

3599

4431

Inventory

2220

2253

2699

3405

4311

Loans & Advances

822

393

1159

1420

1748

Investments

Gross Block

4989

5760

5940

6230

6530

Net Block

3049

3529

3387

3337

3279

CWIP

163

20

30

30

Total Assets

5973

6673

7016

7865

9068

Current Liabilities & Provisions

2400

2291

3356

4061

4967

Debt

2641

2753

2353

2153

1953

Other Liabilities

192

223

223

223

223

Total Liabilities

5233

5268

5932

6438

7144

Shareholders' Equity

94

94

94

94

94

Reserves & Surplus

3047

3603

4346

5394

6797

Total Networth

3141

3696

4440

5488

6891

5973

6673

7016

7865

9068

Source: Company, Karvy Research

Exhibit 10: Balance Sheet

YE Mar (Rs. Million)
Cash & Inventories

Miscellaneous

Minority Interest
Total Networth & Liabilities
Source: Company, Karvy Research

November 13, 2014

Siyaram Silk Mills

Exhibit 11: Cash Flow Statement

YE Mar (Rs. Million)

FY13

EBIT
(Inc.)/Dec in working capital
Other income

FY14

FY15E

FY16E

FY17E

884

1110

1417

1835

2343

(132)

(311)

(1386)

(1128)

(1416)

185

158

120

120

120

Depreciation

218

292

322

335

351

Interest paid

(252)

(287)

(268)

(237)

(216)

Tax paid

(268)

(345)

(419)

(567)

(742)

32

32

Dividends paid

(82)

(88)

(99)

(99)

(99)

Cash flow from operations

588

560

(313)

260

343

(973)

(608)

(200)

(300)

(300)

(Inc.)/Dec. in investments

28

Others

(945)

(608)

(200)

(300)

(300)

Others

Inc/dec in capital expenditure

Cash flow from investing activities

Issuance of equity
(In)/dec in borrowings

259

113

(400)

(200)

(200)

Others

111

(41)

(8)

Cash flow from financing activities

287

113

(400)

(200)

(200)

Net change in cash

13

23

(921)

(240)

(157)

Source: Company, Karvy Research

Exhibit 12: Key Ratios

YE Mar (%)

FY13

FY14

FY15E

FY16E

FY17E

EBIDTA Margin (%)

12.7

10.6

10.7

11.0

11.2

EBIT Margin (%)

10.3

8.5

8.5

8.9

9.4

Net Profit Margin (%)

6.2

5.3

4.9

5.4

5.9

Dividend Payout ratio

0.1

0.1

0.1

0.1

0.1

Net Debt/Equity

0.8

0.7

0.7

0.6

0.5

RoE (%)

23.3

18.9

18.6

20.9

23.2

RoCE (%)

20.2

19.1

20.0

22.5

26.3

YE Mar

FY13

FY14

FY15E

FY16E

FY17E

EPS (Rs.)

58.7

67.8

90.7

122.8

160.7

DPS (Rs.)

7.5

8.0

9.0

9.0

9.0

BV (Rs.)

335.1

394.4

473.7

586.0

736.2

PE (x)

14.7

12.7

9.5

7.0

5.4

P/BV (x)

2.6

2.2

1.8

1.5

1.2

EV/EBIDTA (x)

9.7

7.7

6.5

5.2

4.2

EV/Sales (x)

1.0

0.8

0.7

0.6

0.5

Source: Company, Karvy Research

Exhibit 13: Valuation Parameters

Source: Company, Karvy Research

November 13, 2014

Siyaram Silk Mills

Stock Ratings
Buy
Hold
Sell

:
:
:

Absolute Returns
> 15%
15%
< 5%

Connect & discuss more at

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Toll Free: 1800 425 8283

Disclosures Appendix
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The following analyst(s), who is (are) primarily responsible for this report, certify (ies) that the views expressed herein accurately reflect his (their) personal
view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the
specific recommendation(s) or views contained in this research report.

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