Angel Broking has recommended 'Buy' on Siyaram Silk Mills with target price of Rs 1,221 as against current market price (CMP) of Rs 1,060 in its report.
Commenting on the investment rationale Angel Broking said, ''Siyaram Silk Mills (SSML) reported better-than-estimated numbers for 4QFY2015. The company's top-line for the quarter grew by 18.3% yoy to Rs 4.80 billion, higher than our estimate of Rs 4.47 billion.
During the quarter, higher raw material cost was offset by lower other expense and employee expense. This resulted in the operating margin expanding by 153bp yoy to 12.2%, against our estimates of 10.9%. Further, a lower tax rate (29.2% vs 36.2%) resulted in the net profit increasing by 59.2% yoy to Rs 320 million, higher than our estimate of Rs 230 million.
We believe that with market leadership in blended fabrics, strong brand building, wide distribution channel, strong presence in tier II and tier III cities and emphasis on latest designs and affordable pricing points, SSML will be able to post a revenue CAGR of 11.4% over FY2015-17E to Rs 18.73 billion with an EBITDA margin of 12.2% by FY2017E. We expect profit to grow at a CAGR of 21.3% over FY2015-17E to Rs 1.16 billion.
SSML is trading at a PE multiple of 8.7x its FY2017E earnings. We recommend a Buy rating on the stock with a target price of Rs 1,221, valuing the stock at a PE multiple of 10x its FY2017E earnings.''
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