siyaram silk mills ltd - national stock exchange of …...siyaram silk mills ltd’s (ssml’s)...

Siyaram Silk Mills Ltd

Enhancing investment decisions

Q4FY11 Result Update

© 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 EQUITIES | 1

Company name Tag line

Fundamental Grade X/5 (_____ fundamentals)

Valuation Grade X/5 (CMP is/has ___)

Industry _____ (GICS Code)

Fair Value Rs 374 CMP Rs 379

May 25, 2011


Another strong quarter

Fundamental Grade 4/5 (Superior fundamentals)

Valuation Grade 3/5 (CMP is aligned)

Industry Textile, Apparel & Luxury Goods

Siyaram Silk Mills Ltd’s (SSML’s) Q4FY11 revenues were higher than CRISIL Equities’ expectations driven by strong growth across brands, whereas margins remained in line with expectations. Going forward we expect demand for clothing and furnishing fabric to remain strong. We maintain our fundamental grade of 4/5. Q4FY11 result analysis

• SSML’s Q4FY11 revenues increased 30% y-o-y to Rs 2,455 mn owing to

strong volume growth across brands and products.

• EBITDA margins contracted by about 80 bps to 13% y-o-y largely on

account of higher other expenses. Operating profitability remained flat q-

o-q.

• Lower EBITDA margin coupled with higher interest expenses lowered PAT

margin by around 100 bps y-o-y. However, higher other income and

stable operating profitability augmented PAT by 17% q-o-q to Rs 186 mn

and improved PAT margin by 60 bps to 7.6%.

• The company has declared a dividend of Re 7 per share. At the current

market price, dividend yield is 2%. Revised capacity expansion on schedule The management had announced a revised capacity expansion plan for the FY11-13 period in the previous quarter. The plan entailed a revision of timelines for the fabric capacity owing to uncertainty surrounding the TUF scheme. The government has restructured and extended the scheme till FY12, as a result the revised plan is on schedule. Revenue estimates revised marginally upwards

We have marginally raised our revenue estimates for FY12 and FY13 in view of the strong demand for the company’s products. However, earnings estimates for FY12 are revised marginally downwards on account of higher interest rates. Valuations: Current market price is aligned We continue to value SSML based on the discounted cash flow method and retain our fair value of Rs 374. The stock has risen by 25% since our report dated February 14, 2011. At the current market price, the stock merits a valuation grade of 3/5.

KEY FORECAST

(Rs mn) FY09 FY10 FY11E# FY12 FY13

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 1.8 1.8 1.8

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 6.3 6.2 4.1

P/BV (x) 0.3 0.9 1.6 1.3 1.0

EV/EBITDA (x) 5.2 4.1 5.6 5.2 3.8

#FY11 numbers based on abridged financials

NM: Not meaningful; CMP: Current Market Price

Source: Company, CRISIL Equities estimate

CFV MATRIX

KEY STOCK STATISTICS NIFTY 5387

NSE ticker SIYSIL

Face value (Rs per share) 10

Shares outstanding (mn) 9.4

Market cap (Rs mn)/(US$ mn) 3,619/80

Enterprise value (Rs mn) /(US$ mn) 5,276/117

52-week range (Rs) (H/L) 450/156

Beta 0.95

Free float (%) 32.9%

Avg daily volumes (30-days) 10,005

Avg daily value (30-days) (Rs mn) 3.9

SHAREHOLDING PATTERN

PERFORMANCE VIS-À-VIS MARKET

Returns

1-m 3-m 6-m 12-m

Siyaram Silk Mills Ltd -0.1% 22% -8% 123%

NIFTY -6% 1% -7% 11%

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%

4.2% 3.9% 3.6% 3.6%

28.8% 29.0% 29.4% 29.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jun-10 Sep-10 Dec-10 Mar-11

Promoter DII Others



Q4FY11 Result Summary (Rs mn) Q4FY11 Q3FY11 Q4FY10 q-o-q (%) y-o-y (%) FY11 FY10 y-o-y (%)

Net sales 2,455 2,280 1,886 7.7 30.2 8,587 6,626 29.6

Raw materials cost 1,232 1,136 970 8.5 27.1 4,247 3,383 25.5

Raw materials cost (% of net sales) 50.2% 49.8% 51.4% 38bps -122bps 49.5% 51.1% -160 bps

Employees cost 127 128 115 (1.0) 9.6 467 373 25.3

Other expenses 777 718 540 8.2 43.8 2,786 2,139 30.2

EBITDA 320 298 261 7.1 22.4 1,089 731 48.7

EBITDA margin 13.0% 13.1% 13.8% -7bps -83bps 12.7% 11.0% 163 bps

Depreciation 52 54 50 (2.1) 5.3 209 202 3.67

EBIT 267.1 244.8 211.3 9.1 26.4 878.2 529.5 65.9

Interest and finance charges 51 36 29 40.2 72.9 147 120 23.14

Operating PBT 217 209 182 3.7 18.9 731 410 0.78

Other Income 44 20.7 27.2 111.6 61.2 98 64 52.6

Extraordinary Income/(expense) - - 12 - nm - 16 nm

PBT 260 229 221 13.5 17.6 828 490 69.0

Tax 74 70 71 5.7 5.1 253 153 65.0

PAT 186 159 150 16.9 23.6 576 337 70.9

Adj PAT 186 159 163 16.9 14.4 576 353 63.0

Adj PAT margin 7.6% 7.0% 8.6% 60bps -104bps 6.7% 5.3% 137 bps

No of equity shares (Mn) 9.4 9.4 9.4 - - 9.4 9.4 -

Adj EPS (Rs) 19.8 17.0 17.3 16.9 14.4 61.4 37.7 63

Source: Company, CRISIL Equ it ies

Sales continue to grow, margins remain stable PAT and PAT margins continue to improve

Source: Company, CRISIL Equ it ies Source: Company, CRISIL Equ it ies

Share price movement Fair value movement since initiation

-Indexed to 100

Source: NSE, CRISIL Equ ities Source: NSE, CRISIL Equ ities

1563

1350

1743

1647

1886

1697

2155

2280

2454

.8

8.0%

8.6%10.3%10.5%

14.0%

11.5%12.7% 13.1% 13.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

500

1,000

1,500

2,000

2,500

3,000

Q4FY

09

Q1FY

10

Q2FY

10

Q3FY

10

Q4FY

10

Q1FY

11

Q2FY

11

Q3FY

11

Q4FY

11

(Rs mn)

Quarterly Sales EBITDA Margin (RHS)

43

38

81

66

153

85

145

159

185.9

2.7% 2.8%

4.6%4.0%

8.1%

5.0%

6.7%

7.0%7.6%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

25

50

75

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125

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175

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Q4FY

09

Q1FY

10

Q2FY

10

Q3FY

10

Q4FY

10

Q1FY

11

Q2FY

11

Q3FY

11

Q4FY

11

(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

Siyaram NIFTY

0

100

200

300

400

500

600

700

800

900

1,000

20

70

120

170

220

270

320

370

420

470

5-O

ct

19-

Oct

2-N

ov

16-N

ov

30-N

ov

14-D

ec

28-D

ec

11-

Jan

25-

Jan

8-F

eb

22-F

eb

8-M

ar

22-M

ar

5-Apr

19-A

pr

3-M

ay

17-M

ay

(in '000)(Rs)

Total Traded Quantity (RHS) CRISIL Fair Value Siyaram



EARNINGS ESTIMATES REVISED We have marginally increased our revenue estimates for FY12 and FY13 in view

of the strong demand for the company’s products. However, earnings estimates

for FY12 are revised marginally downwards on account of higher interest rates.

Particulars Unit

FY12E FY13E

Old New % change Old New % change

Revenue (Rs mn) 10,845 10,994 1.4% 13,893 14,159 1.9%

EBITDA (Rs mn) 1,187 1,196 0.8% 1,686 1,707 1.2%

EBITDA margin % 10.9% 10.9% - 12.1% 12.1% -

PAT (Rs mn) 604 581 -3.9% 857 890 3.9%

PAT margin % 5.6% 5.3% -29bps 6.2% 6.3% 12bps

EPS Rs 64.4 62.0 -3.8% 91.5 95.0 3.8%



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. The stock has risen by 25% since our report dated February 14,

2011. 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


P/E-premium/discount to NIFTY P/E movement


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

* 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

Nov

-07

Feb

-08

May

-08

Jul-

08

Oct

-08

Dec-

08

Mar

-09

May

-09

Aug

-09

Oct

-09

Jan-1

0

Apr-

10

Jun-1

0

Sep-

10

Nov

-10

Feb

-11

Apr-

11

(Rs)

Siyaram 1x 3x 5x 7x 9x

0

2,500

5,000

7,500

10,000

12,500

Nov

-07

Feb

-08

May

-08

Jul-

08

Oct

-08

Dec-

08

Mar

-09

May

-09

Aug

-09

Oct

-09

Jan-1

0

Apr-

10

Jun-1

0

Sep-

10

Nov

-10

Feb

-11

Apr-

11

(Rs mn)

EV 2x 4x 6x 8x

-100%

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Nov

-07

Feb-0

8

May-0

8

Jul-

08

Oct

-08

Dec-

08

Mar

-09

May-0

9

Aug

-09

Oct

-09

Jan-1

0

Apr-

10

Jun-

10

Sep-

10

Nov

-10

Feb-1

1

Apr-

11

Premium/Discount to NIFTY Median

0

5

10

15

20

25

Nov-0

7

Feb-

08

May-0

8

Jul-

08

Oct

-08

Dec-

08

Mar

-09

May-0

9

Aug

-09

Oct

-09

Jan-1

0

Apr-

10

Jun-

10

Sep-

10

Nov-1

0

Feb-

11

Apr-

111yr Fwd PE (x) Median PE

+1 std dev

-1 std dev



FINANCIALS

Numbers are adjusted for trade discounts, returns and rebates

Note: All ratios are computed on Adj PAT

#FY11 numbers based on abridged financials

Source: Company, CRISIL Equities 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 6.3 6.2 4.1 Working capital changes 347 444 (990) 98 (751)

Price-book (x) 0.3 0.9 1.6 1.3 1.0 Net cash from operations 646 968 (218) 936 475

EV/EBITDA (x) 5.2 4.1 5.6 5.2 3.8 Cash from investments

EV/Sales (x) 0.4 0.4 0.6 0.6 0.5 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 1.8 1.8 1.8 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) Q4FY10 Q1FY10 Q2FY11 Q3FY11 Q4FY11

Net debt/equity (x) 1.5 0.9 1.1 1.0 0.8 Net Sales 1,886 1,697 2,155 2,280 2,455

Interest coverage 1.6 4.5 6.0 4.9 6.8 Change (q-o-q) 14% -10% 27% 6% 8%

EBITDA 263 195 274 298 320

Per share Change (q-o-q) 52% -26% 40% 9% 7%

FY09 FY10 FY11# FY12E FY13E EBITDA margin 14.0% 11.5% 12.7% 13.1% 13.0%

Adj EPS (Rs) 10.9 34.0 61.4 62.0 95.0 PAT 152 85 145 159 186

CEPS 31.4 55.6 83.8 89.4 130.8 Adj PAT 163 85 145 159 186

Book value 151.9 181.2 234.5 288.2 375.0 Change (q-o-q) 145% -48% 71% 9% 17%

Dividend (Rs) 5.8 7.0 7.0 7.0 7.0 Adj PAT margin 8.6% 5.0% 6.7% 7.0% 7.6%

Actual o/s shares (mn) 9.4 9.4 9.4 9.4 9.4 Adj EPS 16.3 9.1 15.5 17.0 19.8


CRISIL Independent Equity Research Team

Mukesh Agarwal Senior Director +91 (22) 3342 3035 [email protected]

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