Siyaram Silk Mills (SIYSIL) engaged in the textile business has in its product portfolio fabrics, yarns, home furnishing products and readymade garments. The company's 1-year stock return is at 177%, while on the YTD basis the company's return is around 36%. The company commands a low P/E in comparison to its peers with trailing 12 months PE at 12.77. Also, the return on equity is a good over 20%. Another point worth mentioning is that through gradual expansion of its capacities, the firm over the period of 10 years has reduced its debt/equity from 1.0x in Fy12 to 0.3x in Fy22.
Within the company's brand portfolio, there are a host of reputed brands such as Siyaram (flagship
brand), Oxemberg, MSD and J Hampstead.
As per the brokerage ICICI Direct which has recommended to buy the stock, Siyaram Silk has reported a strong revenue recovery with a significant
improvement in the margin profile, which is its highest EBITDA margin performance. The company's revenue grew 28% YoY to Rs. 628 crore. Gross margin improved 120 bps YoY to 39.8% (Q3FY22: 45.4%). The company owing to its improved operational performance as in controlling cost etc. clocked an all- time high EBITDA margin of 18.7% (up 293 bps YoY). Consequently the company's PAT increased from Rs. 58 crore in Q4Fy21 to Rs. 77 crore in the period under review.
Brokerage's take on the multibagger Siyaram Silk Mills stock:
The brokerage mentions that the stock price of Siyaram Silk over the last 3 years has zoomed at a CAGR of 20% and maintains 'Buy' call and value it at Rs. 665 i.e. 12x FY24E EPS.
Demand revival, augmented capital efficiency and cost savings to drive company's stock price:
The stock as per the brokerage will do well primarily on account of demand revival as the company already has its marked presence backed by its strong brand portfolio, pan-India distribution and presence across various price points. Also, the enhanced capital efficiency in terms of leverage, working capital and higher profitability is expected to augment the company's RoCE to around 22% by Fy24E. Also, the cost savings made via cost rationalisation measures implemented in Fy21 are deemed to be of structural nature by the company's management and thus is expected to aid EBITDA going ahead.
The stock has been picked from ICICI Direct report post the company's results for the March ended quarter. Investing in stocks is risky. Please consult a professional advisor before investing in the stock markets. The author and Greynium Information Technologies Pvt Ltd, would not be responsible for losses incurred.