03 March 2025 Company Update
Sai Silk (Kalamandir)
Competitive intensity in core markets rising BUY
We recently interacted with SSKL’s management. Key takes were: (1) Competitive
CMP (as on 28 Feb 2025) INR 135
intensity in core markets (AP/Telangana) has inched up. However, management
highlighted that these are momentary bursts of aggression in terms of discounts Target Price INR 270
and are likely to taper off. The team is also taking initiatives to spur up sales density NIFTY 22,125
in these catchments; (2) VML store expansion (in Tamil Nadu) short of a couple of
delays remains on track; however, sales density hasn’t yet caught up to format
KEY STOCK DATA
average. This typically takes 2-3 wedding seasons to mature in terms of throughput.
KLM format’s performance remains a sore point (especially the Men’s and Kid’s Bloomberg code SSKL IN
wear categories). Most of the pain seems captured in valuations (~9x FY27 P/E; <5x No. of Shares (mn) 153
FY27 EV/EBITDA). However, the street isn’t capturing the revenue ramp-up
MCap (INR bn) / ($ mn) 21/238
expected from sales density improvement of the recently-added stores (11 stores
added since Sep-23). We largely maintain our BUY rating with a DCF-based TP of 6m avg traded value (INR mn) 72
270/sh (implying 17x FY27 P/E). 52 Week high / low INR 238/134
▪ Core markets are seeing momentary increase in competitive intensity:
Management highlighted that core markets (AP/Telangana) are witnessing rising
SHAREHOLDING PATTERN (%)
competitive intensity from peers (Varahi Silks; Managalya Silk, Chennai Silks).
However, it highlighted that these are momentary bursts of aggression which are Sep-24 Dec-24
likely to taper off in a quarter or two. SSKL too is taking initiatives to counter this Promoters 60.80 60.80
aggression. KLM fashion mall continues to struggle (esp. in the Men’s and Kid’s
FIs & Local MFs 16.16 15.41
wear categories).
▪ VML’s TN performance below expectations in FY25; to play catch up in FY26: FPIs 3.29 3.26
VML’s expansion plan remains broadly on track, barring a few store opening Public & Others 19.75 20.53
delays. However, sales density hasn’t yet caught up to format average. Note: 11
Pledged Shares 0 0
stores (on a base of 54 stores) have been added since Sep 2023). Hence, SSKL is yet
to see the complete revenue ramp-up from these stores. It typically takes 2-3 Source : BSE
wedding seasons for the stores to mature to steady-state sales density (for
9MFY25; TN contributed ~22% of sales; INR2.34bn vs INR1.87bn in FY24). Sales
density improvement remains a key monitorable for the format’s fate in TN. Cash
position for TN-focused peers remains anemic; hence, competitive intensity
remains benign.
▪ ~60bps of GM gains likely in H2FY26: SSKL saw a meaningful reduction in
creditor days (from 62 days in FY23 to 16 days in FY24; 28 days in H1FY25). This
was done to pay off vendors in advance in place of better cash discounts; ergo
higher GMs. However, the new 45-day MSME payment clause introduced by the
government in FY24 could mean that the extent of GM expansion may be lower
than earlier expected. We expect ~60bps expansion in FY26 (building in 42.3/42.6%
GMs in FY26/27 respectively).
▪ Outlook: Recovery in core markets remains weak. VML’s TN execution is key.
However, the anemic cash position of TN-focused peers could offer a benign
competitive environment for SSKL to gain share in TN. The ask from valuations
remains cheap (<9x FY27 P/E). Our FY26/27 EPS estimates largely remain
unchanged. We maintain our BUY rating with a DCF-based TP ofINR270/sh,
implying 17x FY27 P/E.
Financial Summary (INR mn)
Q3 Q3 YoY Q2 QoQ
(Rs mn) FY22 FY23 FY24 FY25E FY26E FY27E
FY25 FY24 (%) FY25 (%)
Net Revenue 4,486 3,824 17.3 3,473 29.2 11,361 13,515 13,736 14,770 18,015 20,966 Jay Gandhi
Adj EBITDA 789 582 35.6 554 42.5 1,263 1,858 1,793 1,799 2,668 3,247 [Link]@[Link]
APAT 460 320 43.9 238 93.6 544 976 1,009 1,081 1,815 2,279 +91-22-6171-7320
EPS (Rs) 3.1 2.1 49.8 1.6 93.6 3.7 6.6 6.8 7.3 12.3 15.5
P/E (x) 37.5 20.9 20.2 18.9 11.2 9.0
EV/EBITDA (x) 18.0 12.6 10.6 10.0 6.4 4.8
Vedant Mulik
Core RoCE(%) 13.2 17.7 13.8 11.3 17.8 20.4 [Link]@[Link]
Source: Company, HSIE Research +91-22-6171-7348
HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
Sai Silk (Kalamandir): Company Update
Estimate changes
FY25E FY26E FY27E
(Rs mn) Change Change Change
New Old New Old New Old
(%) (%) (%)
Revenue 14,770 14,803 (0.2) 18,015 18,158 (0.8) 20,966 21,207 (1.1)
Gross Profit 6,163 6,177 (0.2) 7,623 7,685 (0.8) 8,922 9,025 (1.1)
Gross Profit Margin (%) 41.7 41.7 (0 bps) 42.3 42.3 (0 bps) 42.6 42.6 (1 bps)
EBITDA 1,799 1,799 (0.0) 2,668 2,691 (0.8) 3,247 3,290 (1.3)
EBITDA margin (%) 12.2 12.2 2 bps 14.8 14.8 (1 bps) 15.5 15.5 (2 bps)
APAT 1,081 1,082 (0.1) 1,815 1,830 (0.8) 2,279 2,306 (1.2)
APAT margin (%) 7.3 7.3 1 bps 10.1 10.1 (0 bps) 10.9 10.9 (1 bps)
EPS (Rs) 7.3 7.3 (0.1) 12.3 12.4 (0.8) 15.5 15.7 (1.2)
Cost of Retailing (%) 29.5 29.6 (3 bps) 27.5 27.5 0 bps 27.1 27.0 2 bps
Page | 2
Sai Silk (Kalamandir): Company Update
Focus Charts
SSKL has consistently gained share over FY16-24 even among immediate peers (Grew revenue/EBITDA at 15/19%
CAGR)
Source: Company, HSIE Research
Focus on TN market for expansion (via VML) will be the key anchor for growth over FY24-27
Source: Company, HSIE Research
Lion’s share of the growth and expansion will be via the unit-economics accretive VML format…we expect VML to
add >90% of SSKL’s incremental revenue over FY24-27
Source: Company, HSIE Research
Page | 3
Sai Silk (Kalamandir): Company Update
Income Statement
Year to March (INR mn) Pro-FY20 Pro-FY21 Pro-FY22 FY23 FY24 FY25E FY26E FY27E
Net Revenues 11,756 6,788 11,361 13,515 13,736 14,770 18,015 20,966
Growth (%) 4.1 (42.3) 67.4 19.0 1.6 7.5 22.0 16.4
Material Expenses 8,048 4,206 7,121 8,226 8,147 8,607 10,391 12,044
Employee Expense 1,244 968 1,174 1,408 1,646 1,972 2,162 2,505
A&P Expense 298 114 492 622 534 606 703 797
Rent Expenses 200 133 213 233 264 262 311 364
Other Expenses 778 618 942 899 1,026 1,121 1,322 1,522
EBITDA 1,188 749 1,420 2,125 2,120 2,203 3,126 3,734
EBITDA Growth (%) (10.7) (36.9) 89.5 49.7 (0.3) 3.9 41.9 19.4
EBITDA Margin (%) 10.1 11.0 12.5 15.7 15.4 14.9 17.4 17.8
Pre-IND AS EBITDA 1,088 620 1,263 1,858 1,793 1,799 2,668 3,247
Pre-IND AS EBITDA Growth (%) (7.5) (43.1) 103.8 47.1 (3.5) 0.3 48.3 21.7
Pre-IND-AS EBITDAM (%) 9.3 9.1 11.1 13.7 13.1 12.2 14.8 15.5
Depreciation 289 326 342 410 479 529 558 589
EBIT 900 423 1,078 1,715 1,641 1,673 2,568 3,145
Pre IND AS EBIT 800 401 1,039 1,650 1,555 1,512 2,364 2,925
Other Income (Including EO Items) 32 26 41 75 235 237 222 280
Interest 368 366 372 454 529 393 365 380
Pre IND AS Interest 368 302 296 307 343 190 146 142
PBT 563 83 747 1,336 1,347 1,517 2,425 3,045
Total Tax 125 24 203 360 338 436 610 766
PAT before share of associate earnings 439 59 544 976 1,009 1,081 1,815 2,279
Share of associate earnings - - - - - - - -
Reported PAT 439 59 544 976 1,009 1,081 1,815 2,279
Exceptional Gain/(loss) - - - - - - - -
Adjusted PAT 439 59 544 976 1,009 1,081 1,815 2,279
APAT Growth (%) (23.9) (86.5) 816.5 79.4 3.4 7.2 67.9 25.5
Adjusted EPS (Rs) 3.0 0.4 3.7 6.6 6.8 7.3 12.3 15.5
EPS Growth (%) (37.9) (86.5) 816.5 79.4 3.4 7.2 67.9 25.5
Source: Company, HSIE Research
Balance Sheet
Year to March (INR mn) Pro-FY20 Pro-FY21 Pro-FY22 FY23 FY24 FY25E FY26E FY27E
SOURCES OF FUNDS
Share Capital - Equity 420 426 426 241 295 295 295 295
Reserves 2,073 2,190 2,734 3,733 10,335 11,446 13,131 15,276
Total Shareholders’ Funds 2,493 2,616 3,160 3,973 10,630 11,741 13,426 15,570
Long Term Debt 349 646 540 654 226 149 149 -
Short Term Debt 1,971 2,265 2,288 2,801 2,351 1,251 1,251 1,251
Total Debt 2,319 2,910 2,828 3,455 2,578 1,401 1,401 1,251
Lease Liabilities 855 782 1,098 1,804 2,065 2,065 2,065 2,065
Net Deferred Taxes 140 140 121 115 102 102 102 102
Other Non-current Liabilities & Provns 5 6 11 27 26 26 26 26
TOTAL SOURCES OF FUNDS 5,813 6,455 7,218 9,374 15,400 15,334 17,019 19,015
APPLICATION OF FUNDS
Net Block 1,791 1,653 1,698 2,047 2,220 2,214 2,208 2,165
CWIP - 21 - - 23 23 23 23
RoU Assets 844 712 993 1,693 1,887 1,854 1,857 1,797
Other Non-current Assets 409 411 418 417 536 536 536 536
Total Non-current Assets 3,043 2,797 3,110 4,157 4,666 4,627 4,624 4,520
Inventories 5,214 5,141 6,531 6,897 7,232 7,615 8,794 9,948
Debtors 17 24 22 29 33 36 43 51
Other Current Assets 231 214 417 624 469 424 517 601
Cash & Equivalents 242 258 486 497 4,016 3,898 4,831 5,978
Total Current Assets 5,705 5,637 7,456 8,047 11,751 11,972 14,186 16,578
Creditors 2,459 1,729 2,821 2,300 592 809 1,234 1,436
Other Current Liabilities & Provns 477 251 528 530 424 456 556 648
Total Current Liabilities 2,936 1,980 3,349 2,830 1,017 1,266 1,790 2,084
Net Current Assets 2,769 3,657 4,108 5,217 10,734 10,707 12,395 14,494
Others
TOTAL APPLICATION OF FUNDS 5,812 6,455 7,218 9,374 15,400 15,334 17,019 19,015
Source: Company, HSIE Research
Page | 4
Sai Silk (Kalamandir): Company Update
Cash Flow Statement
Year to March (INR mn) Pro-FY20 Pro-FY21 Pro-FY22 FY23 FY24 FY25E FY26E FY27E
Reported PBT 563 83 747 1,336 1,347 1,560 2,441 3,063
Non-operating & EO Items 43 62 101 62 (48) (237) (222) (280)
Interest Expenses 364 360 360 432 518 190 146 142
Depreciation 289 326 342 410 479 287 304 322
Working Capital Change (14) (858) (435) (1,368) (2,042) (91) (755) (952)
Tax Paid (262) (59) (31) (459) (469) (448) (614) (771)
OPERATING CASH FLOW ( a ) 983 (84) 1,084 412 (215) 1,260 1,299 1,525
Capex (515) (56) (261) (601) (412) (281) (298) (279)
Free Cash Flow (FCF) 468 (140) 823 (189) (627) 979 1,001 1,246
Investments (27) (139) (199) (67) (3,123) - - -
Non-operating Income 28 17 35 67 217 237 222 280
INVESTING CASH FLOW ( b ) (514) (177) (425) (601) (3,318) (44) (76) 1
Debt Issuance/(Repaid) (58) 591 (83) 850 (878) (1,177) - (149)
FCFE 412 329 576 661 (4,411) 39 1,223 1,376
Share Capital Issuance 10 61 - - 5,653 - - -
Dividend - - - - - - (141) (147)
Others (496) (513) (547) (701) (846) (190) (146) (142)
FINANCING CASH FLOW ( c ) (544) 139 (629) 149 3,930 (1,367) (287) (439)
NET CASH FLOW (a+b+c) (75) (123) 29 (40) 397 (151) 936 1,087
EO Items, Others 317 381 457 537 3,620 4,049 3,896 4,891
Closing Cash & Equivalents 242 258 486 497 4,016 3,898 4,831 5,978
Source: Company, HSIE Research
Key Ratios
Pro-FY20 Pro-FY21 Pro-FY22 FY23 FY24 FY25E FY26E FY27E
PROFITABILITY (%)
GPM 31.5 38.0 37.3 39.1 40.7 41.7 42.3 42.6
EBITDA Margin 10.1 11.0 12.5 15.7 15.4 14.9 17.4 17.8
Pre-EBITDA Margin 9.3 9.1 11.1 13.7 13.1 12.2 14.8 15.5
EBIT Margin 7.7 6.2 9.5 12.7 11.9 11.3 14.3 15.0
APAT Margin 3.7 0.9 4.8 7.2 7.3 7.3 10.1 10.9
RoE 20.0 2.3 18.8 27.4 13.8 9.7 14.4 15.7
RoIC (or Core RoCE) 15.6 5.1 12.2 16.1 12.1 10.4 16.3 18.7
RoCE 15.4 5.2 11.9 15.8 11.3 8.9 12.9 14.2
RoE* 15.7 2.3 18.2 26.5 13.5 9.5 14.2 15.4
RoIC* 13.3 5.7 13.2 17.7 13.8 11.3 17.8 20.4
RoCE* 14.6 5.1 13.0 18.2 12.1 9.0 13.4 14.7
EFFICIENCY
Tax Rate (%) 22.1 28.7 27.1 26.9 25.1 28.8 25.2 25.2
Fixed Asset Turnover (x) 5.8 3.3 5.0 4.9 4.3 4.3 4.8 5.2
Inventory (days) 161.9 276.5 209.8 186.3 192.2 188.2 178.2 173.2
Debtors (days) 0.5 1.3 0.7 0.8 0.9 0.9 0.9 0.9
Other Current Assets (days) 7.2 11.5 13.4 16.8 12.5 10.5 10.5 10.5
Payables (days) 76.3 93.0 90.6 62.1 15.7 20.0 25.0 25.0
Other Current Liab & Provns (days) 14.8 13.5 17.0 14.3 11.3 11.3 11.3 11.3
Cash Conversion Cycle (days) 78.4 182.8 116.3 127.5 178.5 168.3 153.3 148.3
Net D/E (x) 0.8 1.0 0.7 0.7 (0.1) (0.2) (0.3) (0.3)
Interest Coverage (x) 2.4 1.2 2.9 3.8 3.1 4.3 7.0 8.3
PER SHARE DATA (Rs)
EPS 3.0 0.4 3.7 6.6 6.8 7.3 12.3 15.5
CEPS 5.4 3.2 6.5 10.0 10.1 10.9 16.1 19.5
Dividend - - - - - 1.0 1.0 1.0
Book Value 21.3 22.2 26.3 33.0 72.1 79.7 91.1 105.7
VALUATION
P/E (x) 36.6 20.4 19.7 18.4 11.0 8.7
P/BV (x) 5.1 4.1 1.9 1.7 1.5 1.3
EV/EBITDA (x) 17.6 12.3 10.3 9.7 6.2 4.7
EV/Revenues (x) 2.0 1.7 1.3 1.2 0.9 0.7
OCF/EV (%) 4.9 1.8 (1.2) 7.2 7.9 10.1
FCF/EV (%) 3.7 (0.8) (3.4) 5.6 6.1 8.2
FCFE/Mkt Cap (%) 2.9 3.3 (22.2) 0.2 6.1 6.9
Dividend Yield (%) - - - 0.0 0.0 0.0
Source: Company, HSIE Research
Page | 5
Sai Silk (Kalamandir): Company Update
Price Movement
SAI SILK
260
240
220
200
180
160
140
120
100
Jun-24
Feb-24
Mar-24
Apr-24
May-24
Jan-25
Feb-25
Aug-24
Sep-24
Dec-24
Jul-24
Oct-24
Nov-24
Rating Criteria
BUY: >+15% return potential
ADD: +5% to +15% return potential
REDUCE: -10% to +5% return potential
SELL: >10% Downside return potential
Page | 6
Sai Silk (Kalamandir): Company Update
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Page | 7
Sai Silk (Kalamandir): Company Update
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