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  • 10 Aug 2022
  • ICICIdirect Research

DISRUPTION FREE QUARTER AIDS SIYARAM TO REPORT STRONG OPERATIONAL PERFORMANCE

SIYSIL - 991 Change: 15.15 (1.55 %)

News: On a favourable base, SSML reported strong performance in Q1FY23 with standalone revenue growth of 72% YoY to Rs 399 crore (3 year CAGR 7%; QoQ,  de-growth: 36%). Gross margin declined by 470 bps YoY to 44.7% (Q4FY22: 39.8%) probably due to increased cost of raw material. Positive operating leverage and cost control led to employee cost to sales ratio declining by 375 bps to 10.2% while other expense to sales ratio declined by 127 bps YoY to 21.5% which enabled the company to report EBITDA margin of 13% (up 30 bps YoY) during the quarter. Absolute quarterly EBITDA grew 75% YoY to Rs 52 crore (3 year CAGR of 11%). Consequently, the company reported PAT of Rs 31 crore vs PAT of Rs 13 crore in Q1FY22 (3 year CAGR 46%; Q4FY22: Rs 77 crore).

View: Strong revenue growth and gradual improvement in profitability augur well for SSML. One of the several initiatives taken by the company is that it has reduced the number of SKUs and concentrated mainly on fast-moving products and the most preferred designs to avoid inventory blockage and dead stock, thus enhancing its receivables and profitability. On the competitive scenario, the company is expected to benefit from unorganized to organized shift as many smaller unorganised players are facing financial stress. Siyaram owing to its strong balance sheet appears to be well placed to benefit from the current volatile market scenario and garner increased market share. The company’s focus on strengthening balance sheet is visible with significant decline in debt over the years from Rs 590.0 crore in FY18 (D/E: 0.9x) to Rs 212 crore (D/E: ~0.3x). SSML strong product portfolio and Pan India network is likely to aid the company to grow at healthy pace post normalisation of the demand scenario.

Impact: Positive.