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Sai Silks Kalamandir (SSKL) is one of the largest apparel retailers in South India. Through its four store formats, Co offers sarees, mens, kids wear to various segments of the market.

Some of the key highlights include:-

* Operates 62 stores spread across ~ 6.53 lakh sq ft (5.9 lakh sq ft from matured market). 2. Stores: Andhra – 16; Telangana -26; Karnataka -9 and TN – 10. 3. Formats – a. Kalamandir (since 2005; price range of Rs. 1000 - Rs.1 lakh; 11 small medium large stores)-18% Revenue Contribution as of FY24; b. Mandir (since 2011, price range of Rs. 6000 - 3.5 lakh; 4 small stores); c. Vara Mahalakshmi (since 2011, price range of Rs. 4000 to 2.5 lakh;27 small medium large stores)- 41% revenue contribution; d. KLM Ethnic Fashion (since 2017;price range of Rs. 200 – Rs.75K; 19 large format stores) – 35% topline contribution;4.Earns ~ 22.9 crore as average revenue per store; that’s ~ Rs.21,219 average revenue per sq ft.

* Company is focusing on expansion of Varamahalkshmi stores with avg store size ~5000 sq ft. This format is an extension of Kalamandir format offering products with higher price points and more exclusive collections for wedding and festivals. Vara Mahalakshmi has better financials as compared to Company average like higher sales/per sq ft, higher margins, better ROCE. Diversifying with different store format and product will fuel growth and reduce dependency while aiding margins for the company.

* During Q1FY25, the wedding dates were reduced by almost 70% in South since there were no muhurathams resulting in revenues dropping 12.3% YoY. However, Company maintained its gross margins at 41% reinstating expected demand with a lag. Management has guided for recovery in Q2FY25 and historically H2 is better for the company. SSSG is also expected to improve in the coming quarters. Sales has bounced back in Q2 quarter with 6% growth in volumes. H2FY25 is expected to see a growth of 10-12% YoY with higher muhurathams along with planned store expansions.

* Company has hired over 14 employee for IT software development and over 40 personnel for data analytics. All the software programs are developed and maintained by in-house team and stays ahead of peers to trace early signs of customer trends.

Valuation - SSKL is in expansion mode adding ~ 26% to reach 8.2 lakh sq ft of combined store space by FY26E, especially in ‘VaraMahalakshmi’ format which is a premium brand catering to the wedding purchases. With growth and margins coming back, we feel stock is available at attractive valuation and is trading at EV/EBITDA of 8.3x FY26E Ebitda. We recommend to BUY the stock with a target price of Rs 281 (14x Ev/Ebitda on FY26E).

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SEBI Registration number is INH000001766