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Thursday, May 26, 2011

Buy Stocks of Siyaram Silk Mills on dips

Result update on Siyaram Silk Mills and “Buy Stocks” recommendation and stock analysis with target stock price. It is one of the good small cap stock with no doubts.

Siyaram Silk Mills is the largest blended fabric manufacturer in India. They are the preferred sourcing partner for many of the leading apparel brands in country. Along with this, they have presence in country’s retail apparel market with brands like Siyaram’s, J.Hampstead and Oxemberg. The presence of these branded apparel is in thousands of retail apparel shops countrywide.

SSM is expanding at rapid pace from year 2011 till 2013. The company has plans to add 286 looms (479 current looms) in a phased manner over FY2011–13 in the fabric segment. It is also adding 400 machines in its readymade garment (RMG) segment by September 2011. These capacity expansions will definitely help the company to take full advantage of the growing demand in growing apparel consumers market in India.

Stock Analysis
For 4Q FY2011, Siyaram Silk Mills (SSM) has registered strong performance. They have posted 30.2% Y-O-Y growth in net sales to Rs245cr. Net profit has increased 21.8% Y-O-Y growth to Rs19cr. EBITDA increased by 21.4% yoy in 4Q FY2011 to Rs32cr due to higher revenue earnings. For 4Q FY2011, the company posted a 22.6% increase in PAT to Rs187cr on the back of higher revenue and margin expansion.

Stock Valuation
At current stock price of Rs373, the stock trades at reasonable P/E ratio 6 for trailing 4 quarters. Price to book value ratio stands at 1.54. Looking at the expansion under execution in next two years, the stock could provide good investment returns (in the range of 15-20% per annum) in medium to long term. I would recommend to buy stocks of Siyaram silk mills if it dips below the current stock price of Rs 373.

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