Siyaram Silk Mills Ltd T2FY22 results according to HDFC Securities
- SSML at T2FY22 recorded a strong performance. Overall revenue stood at Rs. 480Cr which increased by 1.76x / 1.06x on a YoY / QoQ basis. By segment, branded fabrics, clothing and yarns sales for the quarter were 80/16/4%, respectively.
- The Fabric segment reported 23k Mtrs volume which increased 70% on a sequential basis while the achievement was Rs. 164 / mtr based on QoQ registering 23% growth due to reduction discounts and an improved product mix.
- Apparel segment volumes for the quarter were 12k pieces, up 97% on a QoQ basis while the achievement was Rs. 632 – up 20% on a QoQ basis while the volume Segment Yarn for the quarter was 6lk MT – up 6% on a QoQ basis while achievement stood at Rs. 299.5 / MT – up 8% on a QoQ basis.
- EBITDA for the quarter stood at Rs.85 Cr v / its loss of Rs. 6Cr at Q2FY21 while on a sequential basis EBITDA increased by 1.92x. SSML delivered the best operating performance on record for the quarter, with the highest ever quarterly EBITDA margin of 17.6% compared to 12.4% in the first quarter of fiscal 22.
- Therefore, the PAT for the quarter was Rs. 52Cr against a loss of Rs. 14Cr at T2FY22. Sequentially, he reported a 3-fold growth in PAT in the first quarter of fiscal 22.
HDFC Securities Ltd’s perspective on SSML
The brokerage house in its research report said that “Siyaram Silk Mills Ltd (SSML) has one of the most cautious capital allocation history in the textile and clothing industry in India. Despite the unrest linked to the covid-19 pandemic, it operated at a net D / E rate of 0.1x from FY 21. It has constantly strived to establish itself as a small asset and a pure player in branded fabrics and apparel in the highly commodified, working capital intensive textile industry. SSML is one of the largest poly-viscose blended fabric players in India. Its product portfolio includes costume fabrics, shirt fabrics, casual and formal wear, and home furnishings SSML posted an intelligent recovery in profits after the second wave of covid-19, in which it posted the best quarterly performance on record. T2FY22. “
HDFC Securities further clarified that during the second quarter of fiscal 22, it reported a PAT of Rs. 52Cr which was mainly due to strong operating leverage and its lean cost structure. SSML has positioned its products mainly on the intermediate market, which allows it to compete directly with players in the regional fabric. Its strong balance sheet, deep penetration with a cohesive and focused approach to brand building have been the main growth drivers of the company. During fiscal year 10-20, it had undergone a cumulative investment of ~ Rs. 600Cr for A&P activities which account for 4% of its cumulative revenues. Major demand drivers such as social gatherings, wedding season and festivals are expected to occur at S2FY22. “
Buy Siyaram Silk Mills with a target price of Rs 559
The brokerage said in its research report that âIn our opinion, SSML’s revenue and EBITDA is expected to grow 23% and 73% CAGR in fiscal year 21-24E, while the PAT for fiscal 24E is expected to reach Rs. 183Cr v / s Rs. 3.5Cr in FY21 and Rs.69Cr in FY20. At the same time, we expect the company to enjoy strong operating leverage and generate consistent FCF with improving working capital and ROCE from 7% in FY20 to 19% by FY24E â.
HDFC Securities reported in its research report that âGiven the outlook for healthy growth and a strong set of numbers in T2FY22, we reiterate our positive view on the stock and expect the stock to be further reassessed. Therefore, we have now revised earnings and raised the target price for SSML We believe investors can buy the stock in the range of Rs. 460-465 and further declines to Rs. 410 for a fair value of benchmark of Rs. 503 (13.5x seven FY23E) and the fair value of the bullish case of Rs. 559 (15x seven FY23E) for a time horizon of 2 quarters. “
The stock was featured in the HDFC Securities Ltd. brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author and the brokerage are not responsible for any losses caused as a result of decisions based on the article.