Anil Singhvi picks Siyaram Silk Mills as SIP stock of the day - Know why it is a 'VALUE PICK'

Zee Business Managing Editor Anil Singhvi says that Siyaram Silk Mills is the one stock that investors should have in their portfolio from the textile sector. Out of all the companies. this would be his top pick in the textile sector. Singhvi said that Gokaldas Exports was recommended at Rs 50 – Rs 60 and has doubled from those levels. At current valuations, Siyaram Silk Mills is the best value pick. Investors should have this stock in their portfolio and should be added on all dips, he said.

Singhvi said that Siyaram Silk Mills is a good quality company and the brands of the company are extremely good. "Promoters of the company have over 40 years of experience in textile business and there have been no corporate governance issues with the company and their promoters unlike some other textile companies. Many textile companies do over expansion which later creates significant debt issues and the quality of the balance sheet deteriorates. So, 2 key things which are Good Product and strong promoter are in place." said Singhvi.

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Singhvi said that Siyaram Silk Mills is engaged in making fabric and supplying it in the country. The company is going to benefit from the inventory gain. There is huge demand in the US and Europe. "The clients, to whom they give fabric, export significantly to US & Europe and globally demand has been seeing a significant upsurge which will indirectly benefit Siyaram Silk Mills," said the Market Guru.

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Singhiv said that the market cap of the company is near Rs 1000 cr. "The company will do EPS of 22 and is trading near P/E multiple of 10. The target price on the stock is Rs 300. Investors should not sell at that level as the stock has the potential to move further up," he concluded

Market expert Himanshu Gupta said that the stock has formed a double bottom and looks extremely good on charts. The target p[rice on the stock is Rs 275 and Rs 325. The stock can further move up to Rs 340 and Rs 360.

Research Analyst Ashish Chaturvedi at Zee Business says that Company has famous and well known brands like Siyaram's J.Hampstead,Cadini etc and currently its Brand Ambassador is Ranveer Singh. Company derives around 74% of its Revenue from Fabrics, and the company derives around 90% of its Revenue from the domestic market. Also, its export sales rose from 6.5% in FY16 to Around 10% in FY20 so slowly increasing that too.

Ashish said that the company is focussed on strengthening its balance sheet and reduced borrowings  from Rs 573 cr as on 31 March 2018 to Rs 343 cr as on 30 Sep 2020. Capex being done during this time is around Rs 120 cr. Promoter holding has been good currently, they hold 67.19% stake while Institution holding is at 11.89% thus a good backing by Institutions.

Ashish said that Company showed quality recovery in Q3FY21 because of significantly lower cost of material consumed as % Revenue From 41% to 25%. EPS rose from 1.76 to 5.98 YoY. Company had around an inventory of 350cr which will continue to help in lower cost of materials consumed thus good expected margins or EPS for Q4FY21 too. Company is currently valued at Mcap/Sales of around 1, with PB of 1.5 and has ROE of 11% with dividend yield of around 2%.