This Small Cap Has Surged 17% Since Listing, Analyst Sees Further 36% Rally

Shares of Sai Silks have been on an upward trajectory ever since they were listed in September this year. Analysts at HDFC Securities see the stock going further up.

The Sai Silks Analyst: Jay Gandhi for HDFC Securities initiated coverage on the stock with a “buy” rating and target price of ₹385. The target indicates an around 36% upside from the stock’s last closing price of ₹282.95.

The Sai Silks Thesis: Established around two decades back, Sai Silks (Kalamandir) Ltd has emerged as a prominent player in the apparel retail sector, particularly in southern India. Renowned for its expansive offerings, the fashion major specializes in a diverse range of products, encompassing ethnic wear with a primary focus on sarees, as well as value fashion.

The brokerage highlighted that the company’s expansion strategy is very concentrated, as evidenced by its presence in 54 stores within only 12 southern districts. As per Gandhi, this focused approach underscores the company’s commitment to superior unit economics.

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The emphasis on strategic expansion within a specific geographic region allows for a more efficient and targeted operational model, potentially contributing to enhanced financial performance compared to broader and more dispersed market approaches adopted by other apparel companies, the brokerage firm added.

Gandhi said that the proceeds from the IPO, amounting to ₹566 crore will primarily directed towards the expansion of the more lucrative VML format within the state of Tamil Nadu. The brokerage expects robust growth, with compound annual growth rates (CAGRs) for sales, EBITDA, and net profits at 19%, 27%, and 40%, respectively, over FY2023-26.

Price Action: Sai Silks’ share price was up 2.42% to trade at ₹289.80 in the early hours of trading on Friday.

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