siyaram silk mills ltd - national stock exchange of india
TRANSCRIPT
© CRISIL Limited. All Rights Reserved.
Enhancing investment decisions
Q1FY12 Result Update
Siyaram Silk Mills Ltd
© CRISIL Limited. All Rights Reserved.
Explanation of CRISIL Fundamental and Valuation (CFV) matrix
The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process –
Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental
grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The
valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to
grade 1 (strong downside from the CMP).
CRISIL Fundamental Grade
Assessment CRISIL Valuation Grade
Assessment
5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)
4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)
3/5 Good fundamentals 3/5 Align (+-10% from CMP)
2/5 Moderate fundamentals 2/5 Downside (- 10-25% from CMP)
1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP)
Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest
that can bias the grading recommendation of the company. Additional Disclosure
This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT). Disclaimer:
This Exchange-commissioned Report (Report) is based on data publicly available or from sources considered reliable by CRISIL
(Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for
any errors or omissions or for the results obtained from the use of Data / Report. The Data / Report are subject to change without
any prior notice. Opinions expressed herein are our current opinions as on the date of this Report. Nothing in this Report constitutes
investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold
any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this
Report. This Report is for the personal information only of the authorized recipient in India only. This Report should not be
reproduced or redistributed or communicated directly or indirectly in any form to any other person – especially outside India or
published or copied in whole or in part, for any purpose.
© CRISIL Limited. All Rights Reserved. CRISIL RESEARCH | 1
Siyaram Silk Mills Ltd Realisation drives sales growth
Fundamental Grade 4/5 (Superior fundamentals)
Valuation Grade 3/5 (CMP is aligned)
Industry Textile, Apparel & Luxury Goods
Fair Value Rs 374 CMP Rs 328
August 18, 2011
Siyaram Silk Mills Ltd’s (SSML’s) Q1FY12 revenues and earnings were in line with CRISIL Research’s expectations. Although there was some pressure on volume growth, it was offset by the hike in realisation. Despite operating in a highly fragmented market, SSML has been able to differentiate itself from unorganised and organised competitors. Sustained brand-building efforts have helped the company emerge as a strong brand in its fabric and garment segments. We remain positive on the company’s growth prospects and its ability to withstand growing competition in the fabric space. We maintain our fundamental grade of 4/5 for SSML. Q1FY12 result analysis
• Q1FY12 revenues grew marginally by ~7% y-o-y to Rs 1,812 mn, driven by
demand for branded fabrics. Although the fabric and yarn segments
reported a decline in volume, the company was able to hike realisation
across brands and products.
o The fabric segment registered a 7% decline in volumes; however,
sales increased 3% y-o-y largely driven by improvement in realisation
o A similar trend was observed in the yarn segment where volumes
declined by 25% y-o-y, but realisation improved to around 18%.
o The garment division recorded 36% y-o-y sales growth driven mainly
by a 31% hike in average realisations.
• EBITDA margin improved by ~50 bps to 12.0% y-o-y due to lower raw
material cost as a proportion of revenues (46.7% in Q1FY12 vs. 47.7% in
Q1FY11).
• PAT margin remained flat at 5.3% y-o-y. The marginal improvement in
EBITDA margin was offset by higher interest. EPS stands at Rs 10.2 (Rs
9.1 as on Q1FY11). Revised capacity expansion on schedule
In Q3FY11, the management had announced a revised capacity expansion plan for FY12-13. The plan entailed a revision of timelines for the fabric capacity (286 looms) owing to uncertainty surrounding the Technology Upgradation Fund Scheme. The government has restructured and extended the scheme till FY12; accordingly SSML’s revised plan is also on schedule. Valuations: Current market price is aligned
We maintain our earnings and revenue estimates for FY12 and FY13. We continue to value SSML based on the discounted cash flow method and retain our fair value of Rs 374. At the current market price, the stock merits a valuation grade of 3/5.
KEY FORECAST
(Rs mn) FY09 FY10 FY11# FY12E FY13E
Operating income 6,525 8,005 10,303 10,994 14,159
EBITDA 497 746 1,089 1,196 1,707
Adj PAT 103 319 576 581 890
Adj EPS-Rs 10.9 34.0 61.4 62.0 95.0
EPS growth (%) 24.5 194.8 70.8 0.8 53.3
Dividend yield (%) 11.4 4.3 2.1 2.1 2.1
RoCE (%) 8.2 15.7 21.3 18.1 22.8
RoE (%) 7.4 20.4 29.6 23.7 28.6
PE (x) 4.7 4.8 5.3 5.3 3.5
P/BV (x) 0.3 0.9 1.4 1.1 0.9
EV/EBITDA (x) 5.2 4.1 5.1 4.8 3.5
#FY11 numbers are based on abridged financials
NM: Not meaningful; CMP: Current market price
Source: Company, CRISIL Research estimate
CFV MATRIX
KEY STOCK STATISTICS NIFTY 4945
NSE SIYSIL
Face value (Rs per share) 10
Shares outstanding (mn) 9.4
Market cap (Rs mn)/(US$ mn) 3,083/68
Enterprise value (Rs mn) /(US$ mn) 5,707/125
52-week range (Rs) (H/L) 464/262
Beta 0.8
Free float (%) 32.9%
Avg daily volumes (30-days) 20,044
Avg daily value (30-days) (Rs mn) 7.2
SHAREHOLDING PATTERN
PERFORMANCE VIS-À-VIS MARKET
Returns
1-m 3-m 6-m 12-m
Siyaram -14% -12% 9% -10%
NIFTY -11% -9% -9% -10%
ANALYTICAL CONTACT Sudhir Nair (Head) [email protected]
Arun Vasu [email protected]
Vinay Chhawchharia [email protected]
Client servicing desk
+91 22 3342 3561 [email protected]
1 2 3 4 5
1
2
3
4
5
Valuation Grade
Fu
nd
am
en
tal G
rad
e
Poor Fundamentals
ExcellentFundamentals
Str
on
gD
ow
nsid
e
Str
on
gU
psid
e67.1% 67.1% 67.1% 67.1%
3.9% 3.6% 3.6% 3.8%
29.0% 29.4% 29.3% 29.1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Sep-10 Dec-10 Mar-11 Jun-11
Promoter DII Others
© CRISIL Limited. All Rights Reserved. CRISIL RESEARCH | 2
Siyaram Silk Mills Ltd
Q1FY12 Result Summary (Rs mn) Q1FY12 Q4FY11 Q1FY11 q-o-q (%) y-o-y (%)
Net sales 1,812 2,455 1,697 (26.2) 6.8
Raw materials cost 846 1,232 809 (31.3) 4.6
Raw materials cost (% of net sales) 46.7% 50.2% 47.7% -351bps -98bps
Employees cost 136 127 101 7.7 35.0
Other expenses 612 777 592 (21.3) 3.3
EBITDA 218 320 195 (31.7) 11.7
EBITDA margin 12.0% 13.0% 11.5% -97bps 53bps
Depreciation 51 52 52 (3.2) (2.0)
EBIT 167.6 267.1 143.6 (37.3) 16.7
Interest and finance charges 45 51 28 (10.9) 60.3
Operating PBT 123 217 116 (43.4) 6.0
Other Income 16 44 10 (63.9) 54.6
PBT 138 260 126 (46.9) 10.0
Tax 43 74 41 (42.2) 5.7
PAT 95 186 85 (48.7) 12.1
Adj PAT 95 186 85 (48.7) 12.1
Adj PAT margin 5.3% 7.6% 5.0% -231bps 25bps
No of equity shares (Mn) 9.4 9.4 9.4 - -
Adj EPS (Rs) 10.2 19.8 9.1 (48.7) 12.1
Source: Company, CRISIL Research
EBITDA margin stable y-o-y PAT and PAT margin improve y-o-y
Source: Company, CRISIL Research Source: Company, CRISIL Research
Share price movement Fair value movement since initiation
-indexed to 100
Source: NSE, CRISIL Research Source: NSE, CRISIL Research
1350
1743
1647
1886
1697
2155
2280
2455
1812
8.6%
10.3% 10.5%
14.0%
11.5%12.7% 13.1% 13.0%
12.0%
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
500
1,000
1,500
2,000
2,500
3,000
Q1FY
10
Q2FY
10
Q3FY
10
Q4FY
10
Q1FY
11
Q2FY
11
Q3FY
11
Q4FY
11
Q1FY
12
(Rs mn)
Quarterly Sales EBITDA Margin (RHS)
38
81
66
153
85
145
159
186
95
2.8%
4.6%4.0%
8.1%
5.0%
6.7% 7.0%7.6%
5.3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
25
50
75
100
125
150
175
200
Q1FY
10
Q2FY
10
Q3FY
10
Q4FY
10
Q1FY
11
Q2FY
11
Q3FY
11
Q4FY
11
Q1FY
12
(Rs mn)
Quarterly PAT PAT Margin (RHS)
0
50
100
150
200
250
Jan-0
8
Mar
-08
May-0
8
Jul-
08
Oct
-08
Dec-
08
Feb-0
9
Apr-
09
Jul-
09
Sep-
09
Nov
-09
Jan-1
0
Apr-
10
Jun-
10
Aug
-10
Nov
-10
Jan-1
1
Mar
-11
May-1
1
Aug
-11
Siyaram NIFTY
0
50
100
150
200
250
300
350
400
450
500
20
70
120
170
220
270
320
370
420
470
520
08-S
ep-
10
29-S
ep-
10
20-
Oct
-10
10-
Nov
-10
01-D
ec-
10
22-D
ec-
10
12-J
an-1
1
02-
Feb-
11
23-
Feb-
11
16-
Mar
-11
06-A
pr-
11
27-A
pr-
11
18-M
ay-1
1
08-
Jun-
11
29-
Jun-
11
20-J
ul-1
1
10-
Aug-1
1
('000)(Rs)
Total Traded Quantity (RHS) CRISIL Fair Value Siyaram
Branded fabric segment
boosts the top line
Lower raw material costs
marginally improve
EBITDA
© CRISIL Limited. All Rights Reserved. CRISIL RESEARCH | 3
Siyaram Silk Mills Ltd
VALUATION
We continue to value SSML based on the DCF method and retain our fair value
of Rs 374. Our current forecast period is from FY12 to FY21 to factor in the
capex plan. At the current market price, the stock merits a valuation grade of
3/5.
One-year forward P/E band One-year forward EV/EBITDA band
Source: NSE, CRISIL Research Source: NSE, CRISIL Research
P/E-premium/discount to NIFTY P/E movement
Source: NSE, CRISIL Research Source: NSE, CRISIL Research
CRISIL IER reports released on Siyaram Silk Mills Ltd
Date Nature of report
Fundamental
grade Fair value
Valuation
grade
CMP
(on the date of report)
8-Sep-10 Initiating coverage* 4/5 Rs 340 3/5 Rs 369
9-Nov-10 Q2FY11 result update 4/5 Rs 374 2/5 Rs 415
14-Feb-11 Q3FY11 result update 4/5 Rs 374 4/5 Rs 304
25-May-11 Q4FY11 result update 4/5 Rs 374 3/5 Rs 379
18-Aug-11 Q1FY12 result update 4/5 Rs 374 3/5 Rs 328
* For detailed initiating coverage report please visit: www.ier.co.in
CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.
0
100
200
300
400
500
600
700
Jan-0
8
Apr-
08
Jul-
08
Oct
-08
Feb-0
9
May-0
9
Aug
-09
Dec-
09
Mar
-10
Jun-
10
Oct
-10
Jan-1
1
Apr-
11
Aug
-11
(Rs)
Siyaram 1x 1x 4x 7x 10x
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Jan-0
8
Apr-
08
Jul-
08
Oct
-08
Feb-0
9
May-0
9
Aug
-09
Dec-
09
Mar
-10
Jun-
10
Oct
-10
Jan-1
1
Apr-
11
Aug
-11
(Rs mn)
EV 3x 4x 5x 6x
-100%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
Jan-
08
Apr
-08
Jul-
08
Oct
-08
Feb
-09
May-
09
Aug-
09
Dec
-09
Mar-
10
Jun-1
0
Oct
-10
Jan-
11
Apr
-11
Aug-
11
Premium/Discount to NIFTY Median premium/discount to NIFTY
0
2
4
6
8
10
12
14
16
18
20
Jan-
08
Apr-
08
Jul-
08
Oct
-08
Feb-
09
May-
09
Aug-
09
Dec-
09
Mar-
10
Jun-
10
Oct
-10
Jan-
11
Apr-
11
Aug-
11
(Times)
1yr Fwd PE (x) Median PE
+1 std dev
-1 std dev
© CRISIL Limited. All Rights Reserved. CRISIL RESEARCH | 4
Siyaram Silk Mills Ltd
FINANCIALS
Note: All ratios are computed on Adj PAT
#FY11 numbers are based on abridged financials
Source: Company, CRISIL Research estimate
Income statement Balance Sheet
(Rs mn) FY09 FY10 FY11# FY12E FY13E (Rs mn) FY09 FY10 FY11# FY12E FY13E
Operating income 6,525 8,005 10,303 10,994 14,159 Liabilities
EBITDA 497 746 1,089 1,196 1,707 Equity share capital 94 94 94 94 94
EBITDA margin 7.6% 9.3% 10.6% 10.9% 12.1% Reserves 1,329 1,605 2,104 2,607 3,421
Depreciation 192 202 209 258 336 Minorities - - - - -
EBIT 305 544 879 939 1,371 Net worth 1,423 1,699 2,198 2,701 3,515
Interest 190 120 147 190 202 Convertible debt - - - - -
Operating PBT 115 424 732 748 1,169 Other debt 2,135 1,686 2,686 2,786 3,016
Other income 20 48 98 88 113 Total debt 2,135 1,686 2,686 2,786 3,016
Exceptional inc/(exp) 12 18 - - - Deferred tax liability (net) 180 183 170 170 170
PBT 146 491 830 836 1,283 Total liabilities 3,738 3,568 5,054 5,658 6,701
Tax provision 32 153 254 256 392 Assets
Minority interest - - - - - Net fixed assets 2,019 1,980 1,873 2,515 3,479
PAT (Reported) 114 337 576 581 890 Capital WIP 18 5 605 705 55
Less: Exceptionals 12 18 - - - Total fixed assets 2,037 1,984 2,477 3,219 3,534
Adjusted PAT 103 319 576 581 890 Investments 0 197 177 157 137
Current assets
Ratios Inventory 972 893 1,496 1,566 2,095
FY09 FY10 FY11# FY12E FY13E Sundry debtors 1,138 1,168 1,835 1,747 2,347
Growth Loans and advances 260 157 157 157 157
Operating income (%) 10.0 22.7 28.7 6.7 28.8 Cash & bank balance 21 29 62 51 59
EBITDA (%) 40.4 50.1 45.9 9.9 42.7 Marketable securities - 131 121 111 101
Adj PAT (%) 9.2 210.9 80.6 0.8 53.3 Total current assets 2,391 2,378 3,671 3,632 4,758
Adj EPS (%) 9.2 210.9 80.6 0.8 53.3 Total current liabilities 721 1,013 1,293 1,373 1,750
Net current assets 1,670 1,365 2,378 2,259 3,008
Profitability Intangibles/Misc. expenditure 31 22 22 22 22
EBITDA margin (%) 7.6 9.3 10.6 10.9 12.1 Total assets 3,738 3,568 5,054 5,658 6,701
Adj PAT Margin (%) 1.6 4.0 5.6 5.3 6.3
RoE (%) 7.4 20.4 29.6 23.7 28.6 Cash flow
RoCE (%) 8.2 15.7 21.3 18.1 22.8 (Rs mn) FY09 FY10 FY11# FY12E FY13E
RoIC (%) 8.4 14.5 21.0 17.3 20.8 Pre-tax profit 135 472 830 836 1,283
Total tax paid (27) (150) (267) (256) (392)
Valuations Depreciation 192 202 209 258 336
Price-earnings (x) 4.7 4.8 5.3 5.3 3.5 Working capital changes 347 444 (990) 98 (751)
Price-book (x) 0.3 0.9 1.4 1.1 0.9 Net cash from operations 646 968 (218) 936 475
EV/EBITDA (x) 5.2 4.1 5.1 4.8 3.5 Cash from investments
EV/Sales (x) 0.4 0.4 0.5 0.5 0.4 Capital expenditure (197) (140) (702) (1,000) (650)
Dividend payout ratio (%) 47.9 19.5 11.4 11.3 7.4 Investments and others 2 (328) 30 30 30
Dividend yield (%) 11.4 4.3 2.1 2.1 2.1 Net cash from investments (195) (468) (672) (970) (620)
Cash from financing
B/S ratios Equity raised/(repaid) - - - - -
Inventory days 80 60 73 78 83 Debt raised/(repaid) (399) (449) 1,000 100 230
Creditors days 39 46 47 47 47 Dividend (incl. tax) (55) (66) (77) (77) (77)
Debtor days 64 54 65 59 61 Others (incl extraordinaries) 12 22 - (0) (0)
Working capital days 102 65 60 71 64 Net cash from financing (442) (492) 923 23 153
Gross asset turnover (x) 2.1 2.5 3.1 2.9 2.9 Change in cash position 10 8 33 (11) 8
Net asset turnover (x) 3.3 4.0 5.3 5.0 4.7 C losing cash 21 29 62 51 59
Sales/operating assets (x) 3.2 4.0 4.6 3.9 4.2
Current ratio (x) 3.3 2.3 2.8 2.6 2.7 Quarterly financials
Debt-equity (x) 1.5 1.0 1.2 1.0 0.9 (Rs mn) Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12
Net debt/equity (x) 1.5 0.9 1.1 1.0 0.8 Net Sales 1,697 2,155 2,280 2,455 1,812
Interest coverage 1.6 4.5 6.0 4.9 6.8 Change (q-o-q) -10% 27% 6% 8% -26%
EBITDA 195 274 298 320 218
Per share Change (q-o-q) -26% 40% 9% 7% -32%
FY09 FY10 FY11# FY12E FY13E EBITDA margin 11.5% 12.7% 13.1% 13.0% 12.0%
Adj EPS (Rs) 10.9 34.0 61.4 62.0 95.0 PAT 85 145 159 186 95
CEPS 31.4 55.6 83.8 89.4 130.8 Adj PAT 85 145 159 186 95
Book value 151.9 181.2 234.5 288.2 375.0 Change (q-o-q) -48% 71% 9% 17% -49%
Dividend (Rs) 5.8 7.0 7.0 7.0 7.0 Adj PAT margin 5.0% 6.7% 7.0% 7.6% 5.3%
Actual o/s shares (mn) 9.4 9.4 9.4 9.4 9.4 Adj EPS 9.1 15.5 17.0 19.8 10.2
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