Siyaram Silk Mills is a part of Siyaram Poddar group. This is a vertically integrated textile company. This company has got in-house facilities for spinning, dyeing, weaving, finishing and also garmenting. The brand Siyaram is available at over 40,000 retail outlets all across the country. Besides that the company is also opening its own exclusive stores where it will sell Siyaram besides other brands, which the company has. Beside Siyaram the company also has Oxemberg and J Hamstead as the other brands under which their garments are sold.
If you see the financials of the company, for FY09, the company did sales of about Rs 530 crore, profit after tax (PAT) was about Rs 11.5 crore. In the first nine months, sales are up by about 25% about Rs 472 crore. Profit after tax is up by more than 150% to about Rs 18.5 crore, which means an annualized EPS of Rs 25. The stock currently trading at about Rs 170-172 is available at a PE multiple of less than 7 and a market cap of about Rs 160 crore.
If you look at the valuation of the company—you have a company, which is doing sales of close to Rs 600-650 crore that too in the branded segment available at a market cap of about Rs 160 crore and a PE of less than 7
The company has got a 20 year track record of uninterrupted dividends. Even for 2010 the company has already given an interim dividend of about 60%. The book value is about Rs 175 which means bonus is definitely a possibility. The best part is that past few years there has been no equity dilution by the company except for the bonus, which the company gave in 2006 and a small preferential issue, which was made to the promoter’s way back in 2001. Besides that there has not been any equity dilution and the equity is very small at about Rs 9.5 crore.
Given all those factors, the price to earning multiple of 7 is the company is currently discounting the PE multiple of a commodity textile play and not really of value added company with good brands. The stock is bound to get re-rated. I think it is a matter of time that the stock gets re-rated.
Source: Internet (moneycontrol.com by Ashish Chug)
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