Siyaram Silk Mills (SSML) :: Angel Broking Diwali Top Picks (Diwali Muharat)

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 Siyaram Silk Mills (SSML) has strong brands, such as Siyaram's, Mistair, MSD,
J. Hampstead and Oxemberg. With launch of two new premium cotton
brands - Zenesis and Moretti, entry into linen fabrics, foray into ladies wear (SKD)
under the brand Siya and increased focus on premium J. Hampstead brand, the
company will be able to maintain its high growth trajectory.
 The revenue share of readymade garments, which is a high margin business, is
expected to increase to 20% in FY2016E from 16.3% in FY2014. The asset turnover
(gross block) is expected to improve from 2.4x in FY2014 to 3.1x in FY2016E as
the company has already incurred the required capex. We believe there would be
minimum capex requirement as it would outsource manufacturing, which would
prove to be more profitable. In addition, with the cash flow coming in, the company
will be able to reduce its debt to `201cr by FY2016E from `275cr in FY2014,
thereby easing interest expenses and improving profitability.
 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 17.8% over FY2014-16E to `1,810cr with an EBITDA margin of 11.1%.
We expect the profit to grow at a CAGR of 32.4% over FY2014-16E to `111cr. On
account of the improved brand acceptance and strong profit growth, we reiterate
our Buy rating on the stock with an upgraded target price of our Buy rating on the stock with an upgraded target price of our Buy rating on the stock with an upgraded target price of ```952, valuing the
stock at a revised target PE of 8x FY2016E earnings. stock at a revised target PE of 8x FY2016E earnings.