Suryavanshi Spinning Mills - Rs.62.00

Established in 1978, Suryavanshi Spinning Mills Ltd (SSML) was promoted by Sri B.N. Agarwal & Sri L.N. Agrawal and is the flagship company of the Suryavanshi group. From a modest beginning with 1728 spindles capacity, the group has emerged as a large textile player with expertise in spinning, yarn dyeing, weaving, fabric dyeing, fabric processing, knitting & garment manufacturing. The company is fully integrated right from manufacturing of yarn to making fashionable readymade garments. Its also a leading exporter to USA, Europe, Japan, China, Korea, Vietnam, Hongkong, Bangladesh, Italy, Egypt, etc.

SSML has three units at Bhongir & Aliabad in AP and Rajna in MP that have an aggregate capacity of more than 1,00,000 spindles and a production capacity of 45 tonnes per day. Owing to continuous modernization and upgradation of its plants, the company can boast of technical superiority. It has latest installations from Blow Room to Autoconers from leading machinery suppliers like Trutzschler of Germany, Rieter of Switzerland and Lakshmi Machine Works from India. Apart from these, other installations such as Yarn Cleaners, Yarn Conditioning equipments have been procured from leading suppliers in the world and a state-of-art machinery set-up is provided in its units. Although the major portion of the revenue is from yarns, the company is gradually expanding its garment manufacturing capacity. It has set up garment factories at Shamirpet and at Bhongir with a total production capacity of 15,000 garments per day. Besides this, there are plans to merge one of its garment company, Suryavanshi Textiles, with itself which will further integrate operations and lead to economies of scale. Moreover due to increased demand, the company has a capex plan of Rs.47 cr. to put up an additional spinning unit in AP with a capacity of 35,000 spindles.

SSML is a strong turnaround case reporting a net profit of Rs.8 cr. in FY06 compared to a net loss of Rs.2 cr. in FY04. Due to better operating efficiency and debt restructuring, the company has already made a smart turnaround and is expected to perform much better in coming years. It has recently raised around Rs.13 cr. by a preferential allotment of 15 lakh shares at Rs.87 per share. For FY06, its top-line grew by 25% to Rs.231 cr. whereas its net profit zoomed 300% to Rs.7.80 cr. thereby reporting an EPS of Rs.11 on its diluted equity of Rs.7.15 cr. For FY07, SSML may clock sales of Rs.325 cr. and net profit of Rs.11 cr. i.e. an EPS of Rs.15. Investors are advised to accumulate at declines with a price target of Rs.120 (100% return) in 15-18 months.