Suryajyoti Spinning Mills - Rs.32.00

Suryajyoti Spinning Mills Ltd. (SSML) was established in 1990 by Mr. R.K. Agarwal, an entrepreneur with over three decades of textile industry experience. It belongs to the well-known L.N. Agrawal Group, which has other listed textile companies like Suryalaxmi Cotton Mills, Suryavanshi Spinning Mills, Suryalata Spinning in its fold. SSML is one of lowest cost yarn producers and a leading manufacturer of a wide range of yarns in cotton, polyester, viscose and polyester-viscose blends in low to medium counts which are auto leveled and auto coned. From initial capacity of 5040 spindles, the company has constantly expanded its business and currently operates 62416 spindles with almost 100% capacity utilization. Besides catering to domestic market, it exports yarns to Korea, Hong Kong, Spain, Bangladesh, Japan, Portugal, Germany, Italy etc.

SSML operates two mills located at Burgul and Makthal both in Mahabubnagar District of AP with a production capacity of 33,184 & 29,232 spindles respectively. These facilities are equipped with speed frame, draw frame and spinning machinery from Rieter (India/ Switzerland), blow room and carding machines from Truetzschler (India/ Germany) and autoconers from Schlafhorst (Germany). The mills are operating, 360 days a year on a three-shift basis and are backed by 100% standby generators in case of power failures. Notably, the spindles can be interchanged from synthetic to cotton production and back to synthetic with short lead-time depending upon demand. In June’06, SSML completed the first phase of its modernization & expansion, wherein it added 7,056 spindles at its Makthal unit to manufacture value added yarns like multifold and combed yarns. Further, at an investment of Rs.48 cr., it is setting up a new unit at Rajapur by installing new 25200 spindles for the production of higher counts of cotton. Following this capacity enhancement, to be commissioned by March’07, SSML’s installed capacity will increase to 87,616 spindles almost equally distributed between low/ medium count cotton yarn, high-count cotton yarn and synthetic/blended yarn. Moreover, the company is planning to set up a unit at Hyderabad to manufacture bottom weight fabrics and is also working on the feasibility of putting up of a fully integrated state of art weaving, processing and garmenting unit at an outlay of Rs.100 cr.

Incidentally, the total expansion is funded by debt (under TUF scheme) and partly by internal accruals. The company is not going for equity dilution, which is good for shareholders to a certain extent. For the full year ending 31st March’06, sales were marginally up at Rs.140 cr. but PBT increased by 60% to Rs.9.20 cr. After providing for deferred tax it may report a PAT of Rs.6.5 - 7 cr., which works out to an EPS of Rs.5 on its equity of Rs.13.50 cr. It is expected to declare 10% dividend i.e. an yield of 3% on its current market price (CMP). For FY07, it can register an EPS of Rs.7 and at a fair P/E multiple of 8, the scrip has the potential to touch Rs.60 to offer 100% return in a years time.