1QFY2012 Result Update | Textile

August 12, 2011

Siyaram Silk Mills

Performance Highlights
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 1QCY2012 1QCY2011 181.2 21.8 12.0 9.5 169.7 19.5 11.5 8.5 %chg (yoy) 4QCY2011 6.8 11.7 54bp 12.1 245.5 31.9 13.0 18.7 %chg (qoq) (26.2) (31.7) (97)bp (49.1)

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (`cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Textile 323 0.7 464 / 267 13,295 10 16,840 5,073 SIYR.BO SIYA@IN

`345 `422
12 Months

Source: Company, Angel Research

For 1QFY2011, Siyaram Silk Mills (SSM) posted a modest performance. The companys net sales grew by 6.8% yoy to `181cr. OPM expanded by 54bp yoy to 12.0%. Net profit witnessed 12.1% yoy growth to `10cr. We continue to maintain our Buy view on the stock. Modest top-line growth, margin expands: SSMs top line grew by 6.8% yoy to `181cr, led by higher realisation and volumes. EBITDA increased by 11.7% yoy in 1QFY2011 to `22cr on the back of higher revenue and margin expansion during the quarter. EBITDA margin expanded by 54bp yoy to 12.0% due to lower rawmaterial cost, which declined by 476bp yoy to 42.4% (47.2%) of sales. The decline in raw-material cost was partially offset by a 157bp yoy increase in employee cost to 7.5% (5.9%). For 1QFY2012, the company witnessed a 12.1% increase in PAT to `10cr on the back of higher revenue and margin expansion during the quarter. Outlook and valuation: SSM is in a strong expansion mode. The company plans to add 286 looms (479 current looms) in a phased manner over FY201113 in the fabric segment and will be adding 400 machines in its readymade garment (RMG) segment by September 2011. Moreover, timely capacity expansion will help the company to take full advantage of the growing demand in India, which will drive its revenue at a 16% CAGR over FY201113E. The stock is currently trading at reasonable valuation of 4.9x FY2013E earnings (as against its historical median of 6x one-year forward EPS). We continue to maintain our Buy rating on the stock with a revised target price of `422, valuing the stock at 6x FY2013E earnings.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 67.1 7.9 0.1 25.0

Abs.(%) Sensex Siyaram Silk Mills

3m (8.2) (7.3)

1yr (6.8) (3.3)

3yr 10.7 238

Key Financials
Y/E March (` cr) Net sales % chg Net profit % chg FDEPS (Rs) EBITDA margin (%) P/E (x) RoE (%) RoCE (%) P/BV (x) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2010 660 24.4 34 194.2 35.9 10.6 9.6 21.6 13.0 1.9 0.8 7.3

FY2011 859 30.2 58 71.2 61.5 12.7 5.6 29.6 19.5 1.5 0.7 5.6

FY2012E 982 14.4 61 5.9 65.1 12.2 5.3 25.0 16.5 1.2 0.7 5.6

FY2013E 1,150 17.0 66 8.1 70.4 11.6 4.9 22.3 15.8 1.0 0.6 4.8

Sharan Lillaney
022-3935 7800 Ext: 6811 sharanb.lillaney@angelbroking.com

Please refer to important disclosures at the end of this report

Siyaram Silk Mills | 1QFY2012 Result

Exhibit 1: 1QFY2012 performance

Particulars (` cr) Net Sales Total Expenditure EBITDA OPM (%) Depreciation EBIT Interest Other Income Excp. Item PBT Tax Net Profit NPM (%) Diluted EPS (`)
Source: Company, Angel Research;

1QCY2012 181.2 159.4 21.8 12.0 5.1 16.8 4.5 1.6 13.8 4.3 9.5 5.3 10.2

1QCY2011 169.7 150.2 19.5 11.5 5.2 14.4 2.8 1.0 12.6 4.1 8.5 5.0 9.1

%chg (yoy) 6.8 6.1 11.7 54bp (2.0) 16.7 60.3 54.3 10.0 5.7 12.1 25bp 12.1

4QCY2011 245.5 213.5 31.9 13.0 5.2 26.7 5.1 4.4 0.1 26.1 7.4 18.7 7.6 20.0

%chg (qoq) (26.2) (25.4) (31.7) (97)bp (3.2) (37.3) (10.9) (63.9) (47.1) (42.2) (49.1) (236) (49.1)

FY2011 859 749.9 108.8 12.7 20.9 87.8 14.7 9.8 0.1 82.9 25.3 57.6 6.7 61.5

FY2010 660 589.5 70.2 10.6 20.2 50.0 12.0 9.3 1.6 49.0 15.3 33.7 5.1 35.9

%chg (yoy) 30.2 27.2 54.8 202bp 3.6 75.5 23.2 4.9 (92.6) 69.3 65.0 71.2 161bp 71.2

Revenue up by modest 6.8%

For 1QFY2012, SSM registered 6.8% yoy growth in its revenue to `181cr on the back of higher utilisation in all segments especially the yarn dying segment, which led to higher volumes during the quarter. Higher volumes were complemented by higher realisation.

Exhibit 2: Revenue trend

(` cr) 300 250 200 150 100 50 170 1QFY11 215 228 245 4QFY11 Growth yoy 6.8 181 1QFY12 25.8 23.6
(%)

38.4 30.2

45 40 35 30 25 20 15 10 5 0

2QFY11 3QFY11 Net Sales

Source: Company, Angel Research

August 12, 2011

Siyaram Silk Mills | 1QFY2012 Result

EBITDA margin expands by 54bp yoy in 1QFY2012

EBITDA increased by 11.7% yoy in 1QFY2012 to `22cr on the back of higher revenue during the quarter. EBITDA margin expanded by 54bp yoy to 12.0% due to
lower raw-material cost, which declined by 476bp yoy to 42.4% (47.2%) of sales. The decline in raw-material cost was partially offset by a 157bp yoy increase in employee cost to 7.5% (5.9%).

Exhibit 3: EBITDA margin up yoy

(` cr) 35 30 25 20 15 10 5 20 1QFY11 27 2QFY11 30 3QFY11 EBITDA 32 4QFY11 Margin 22 1QFY12 11.5 12.7 12.0 13.1 13.0
(%)

14 13 13 12 12 11 11

Source: Company, Angel Research

PAT increases by 12.1% yoy in 1QFY2012

For 1QFY2012, the company witnessed a 12.1% increase in PAT to `10cr on the back of higher revenue during the quarter. PAT margin also improved by 25bp yoy to 5.3% (5.0) on the back of EBITDA margin expansion.

Exhibit 4: PAT margin continues to improve yoy

(` cr) 20 18 16 14 12 10 8 6 4 2 (%) 9 8 7 5.3 6 5 4 3 2 9 1QFY11 15 2QFY11 16 3QFY11 PAT 19 4QFY11 Margin 10 1QFY12 1 0

6.7 5.0

7.0

7.6

Source: Company, Angel Research

August 12, 2011

Siyaram Silk Mills | 1QFY2012 Result

Investment arguments
SSM is one of the leading textile manufacturers in India. The company enjoys a strong brand presence across the country, with brands such as Siyaram, Mistair, J Hampstead and Oxemberg in its kitty.

Strong brand presence: SSM has built a strong brand presence in the
country through continuous advertisement and brand-building efforts over the past 30 years. The company has created a niche for itself in a highly competitive industry. SSM enjoys a monopolistic position for its fabric segment under the Siyaram brand, which constitutes nearly 85% of its revenue.

Largest distribution network across India: SSM has one the largest
distribution networks in the country. The company has a strong network of over 1,500 dealers and 500 agents supplying to more than 40,000 outlets across India. This enables the company to launch new products with a high success ratio and low marketing cost, giving it an edge over competitors.

Higher utilisation to drive growth: SSMs yarn segment achieved 57% capacity utilisation in FY2011 compared to 41.9% in FY2009, which is further expected to improve to 80% in FY2012E. Outlook and valuation: SSM is in a strong expansion mode. The company
plans to add 286 looms (479 current looms) in a phased manner over FY201113 in the fabric segment and will be adding 400 machines in its RMG segment by September 2011. Moreover, timely capacity expansion will help the company to take full advantage of the growing demand in India, which will drive its revenue at a 16% CAGR over FY201113E. The stock is currently trading at reasonable valuation of 4.9x FY2013E earnings (as against its historical median of 6x one-year forward EPS). We continue to maintain our Buy rating on the stock with a target price of `422, valuing the stock at 6x FY2013E earnings. Exhibit 5: Key assumptions
Particulars (%) Sales growth EBITDA margin Tax rate NPM
Source: Company, Angel Research

Estimates FY2012 14.4 12.2 31.5 6.2 FY2013 17.0 11.6 31.5 5.7

August 12, 2011

Siyaram Silk Mills | 1QFY2012 Result

Profit and loss statement

Y/E Mar. (` cr) Net sales % chg Total expenditure Consumption of raw materials Employees cost Other expenditure Processing, excise & labour charges Purchase of traded goods Other EBITDA % chg (% of Net sales) Depreciation& amortisation EBIT % chg (% of Net sales) Interest & other charges Adj.Other income (% of PBT) Share in profit of associates Recurring PBT % chg Extraordinary expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earnings of associate Less: Minority interest (MI) % chg Prior period items PAT after MI (reported) Extraordinary income post tax ADJ. PAT % chg (% of Net sales) Basic EPS (Rs) Fully Diluted EPS (Rs) % chg FY2009 FY2010 FY2011 FY2012E FY2013E 530 9.1 488 209 33 116 70 48 42 32.0 8.0 19 23 49.3 4.4 16.8 8.4 57.1 15 19.5 15 3.2 21.9 11 20.4 11 11 20.4 2.2 12.2 12.2 20.4 660 24.4 589 258 39 128 84 71 70 66.1 10.6 20 50 116.5 7.6 12 11 22.3 49 234.6 49 15 31.3 34 194.2 34 34 194.2 5.1 35.9 35.9 194.2 859 30.2 750 367 47 172 106 101 109 54.8 12.7 21 88 75.5 10.2 15 10 11.9 83 69.3 83 25 30.5 58 71.2 58 58 71.2 6.7 61.5 61.5 71.2 982 14.4 863 427 56 188 124 103 119 9.9 12.2 25 95 8.0 9.7 16 10 11.5 89 7.4 89 28 31.5 61 5.9 61 61 5.9 6.2 65.1 65.1 5.9 1,150 17.0 1,017 500 66 216 145 115 133 11.4 11.6 31 102 7.8 8.9 17 11 11.2 96 8.1 96 30 31.5 66 8.1 66 66 8.1 5.7 70.4 70.4 8.1

August 12, 2011

Siyaram Silk Mills | 1QFY2012 Result

Balance sheet
Y/E Mar. (` cr) SOURCES OF FUNDS Equity share capital Reserves& surplus Shareholders funds Total loans Deferred tax liability Total liabilities APPLICATION oF FUNDS Gross block Less: Acc. depreciation Net block Capital work-in-progress Investments Current Assets Cash Loans & advances Inventories Debtors Current liabilities Net Current Assets Total Assets 325 120 205 2 0 248 2.1 34 97 114 61 186 393 337 137 200 0 28 251 2.9 42 89 117 102 149 378 387 157 231 1 18 408 2.9 71 149 185 135 272 522 436 181 255 75 18 429 1.8 71 171 186 150 279 628 536 212 324 18 492 2.2 71 200 219 172 320 663 9.4 133 142 233 18 393 9.4 160 170 190 18 378 9.4 211 220 286 17 522 9.4 260 269 342 17 628 9.4 313 322 324 17 663 FY2009 FY2010 FY2011 FY2012E FY2013E

August 12, 2011

Siyaram Silk Mills | 1QFY2012 Result

Cash flow statement

Y/E Mar. (` cr) Profit before tax Depreciation Change in working capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc.)/Dec. in Fixed assets (Inc.)/Dec. in Investments (Inc.)/Dec. in loans and advances Other income Cash Flow from Investing Issue/(Buy Back) of equity (Inc.)/Dec. in loans Dividend paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2009 15 19 34 8 3 56 (19) 0 (1) 8 (12) (38) (5) 0 (43) 1.0 1.1 2.1 FY2010 49 20 46 11 15 89 (11) (28) (8) 11 (36) (43) (7) (2) (52) 0.8 2.1 2.9 FY2011 FY2012E FY2013E 83 21 (95) 10 25 (26) (51) 10 (29) 10 (60) 96 (8) (3) 85 (0.1) 2.9 2.9 89 25 (8) 10 28 68 (123) 10 (113) 56 (12) 44 (1.0) 2.9 1.8 96 31 (41) 11 30 45 (25) 11 (14) (18) (13) (31) 0.4 1.8 2.2

August 12, 2011

Siyaram Silk Mills | 1QFY2012 Result

Key ratios
Y/E Mar. Valuation Ratio (x) P/E (on FDEPS) P/E (on basic, reported EPS) P/CEPS P/BV Dividend yield (%) Market cap. / Sales EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book value Dupont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of debt (Post Tax) Leverage (x) Operating RoE Returns (%) RoCE (Pre-tax) Angel RoIC (Pre-tax) RoE Turnover ratios (x) Asset turnover (Gross Block) Asset turnover (Net Block) Asset turnover (Total Assets) Operating income / Invested capital Inventory / Sales (days) Receivables (days) Payables (days) Working capital cycle (ex-cash) (days) Solvency ratios (x) Gross debt to equity Net debt to equity Net debt to EBITDA Interest coverage (EBIT / Interest) 1.6 1.6 5.5 2.5 1.1 0.9 2.3 5.9 1.3 1.2 2.4 7.4 1.3 1.2 2.7 7.5 1.0 0.9 2.3 8.0 1.7 2.6 1.3 1.3 71 85 41 138 2.0 3.3 1.7 1.8 52 64 45 91 2.4 4.0 1.9 2.0 51 64 51 88 2.4 4.0 1.7 1.8 59 69 53 102 2.4 4.0 1.8 1.8 59 64 51 95 5.7 5.7 8.2 13.0 13.6 21.6 19.5 20.7 29.6 16.5 18.4 25.0 15.8 17.4 22.3 4.4 78.1 1.3 4.4 5.2 1.8 3.1 7.6 68.7 1.8 9.3 3.9 1.2 16.0 10.2 69.5 2.0 14.4 4.3 1.1 25.1 9.7 68.5 1.8 11.7 3.5 1.2 21.2 8.9 68.5 1.8 11.2 3.4 1.0 19.2 12.2 12.2 32.7 5 151.8 35.9 35.9 57.5 6 181.2 61.5 61.5 83.8 7 234.6 65.1 65.1 91.4 11 287.0 70.4 70.4 103.3 12 343.6 28.3 28.3 10.6 2.3 1.4 0.6 1.0 13.1 1.4 9.6 9.6 6.0 1.9 1.7 0.5 0.8 7.3 1.4 5.6 5.6 4.1 1.5 2.0 0.4 0.7 5.6 1.2 5.3 5.3 3.8 1.2 3.2 0.3 0.7 5.6 1.1 4.9 4.9 3.3 1.0 3.4 0.3 0.6 4.8 1.0 FY2009 FY2010 FY2011 FY2012E FY2013E

August 12, 2011

Siyaram Silk Mills | 1QFY2012 Result

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Siyaram Silk Mills No No Yes No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

August 12, 2011