{"id":5840,"date":"2024-06-28T13:57:20","date_gmt":"2024-06-28T08:57:20","guid":{"rendered":"https:\/\/ksestocks.com\/blog\/?p=5840"},"modified":"2024-06-28T13:57:23","modified_gmt":"2024-06-28T08:57:23","slug":"srvi-continues-on-a-robust-growth-trajectory","status":"publish","type":"post","link":"https:\/\/ksestocks.com\/blog\/srvi-continues-on-a-robust-growth-trajectory\/","title":{"rendered":"SRVI continues on a robust growth trajectory"},"content":{"rendered":"\n<p>Insight Research has just released an update on its coverage of <a href=\"https:\/\/ksestocks.com\/blog\/tag\/srvi\/\" target=\"_blank\" rel=\"noopener\" title=\"SRVI\">SRVI<\/a> stock. The research house has raised its Dec 24<strong> SRVI target price to Rs. 1438 per share<\/strong>.<\/p>\n\n\n\n<p>Here are the key points from the report:<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Stock Performance and Growth<\/h2>\n\n\n\n<p>SRVI&#8217;s stock has significantly outperformed the KSE100 index, delivering a fiscal year-to-date (FYTD) return of 3.6x compared to KSE-100\u2019s 1.8x. This remarkable performance is driven by strong profitability, largely due to the impressive performance of SLM. In CY23, SRVI&#8217;s consolidated topline reached PKR 97 billion, up from PKR 62 billion in CY22, marking a growth of approximately<strong> 57%<\/strong> year-over-year (YoY).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Revenue Breakdown<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Tyre &amp; Tube Segment:<\/strong> <strong>76%<\/strong> growth, driven by the start of commercial production from SLM.<\/li>\n\n\n\n<li><strong>Footwear Segment:<\/strong> <strong>32%<\/strong> growth, supported by an expanded retail network.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Future Projections<\/h3>\n\n\n\n<p>SRVI&#8217;s revenue is projected to grow at a 5-year compound annual growth rate (CAGR) of approximately <strong>23%<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Financial Highlights<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Revenue and Profit<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Consolidated Revenue (CY23):<\/strong> PKR 97 billion<\/li>\n\n\n\n<li><strong>Consolidated Bottom-line (CY23):<\/strong> PKR 4.3 billion, a significant turnaround from a loss of PKR 1.1 billion in CY22.<\/li>\n\n\n\n<li><strong>SLM Performance (CY24):<\/strong> Posted a profit after tax (PAT) of approximately PKR 1.9 billion in 1QCY24, with full-year PAT expected to reach PKR 7.1 billion.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Earnings and Dividends<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Earnings per Share (EPS):<\/strong> Projected at PKR 134.2 for CY24 and PKR 187.5 for CY25.<\/li>\n\n\n\n<li><strong>Dividends per Share (DPS):<\/strong> PKR 20.0 for CY24 and PKR 50.0 for CY25.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Valuation and Investment Stance<\/h2>\n\n\n\n<p>Insight Research maintains a &#8220;BUY&#8221; stance on SRVI with a June 2025 discounted cash flow (DCF) based target price of PKR 1,438 per share, providing an expected capital upside of approximately <strong>51%<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Key Growth Drivers<\/h3>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Export Market Opportunities<\/strong><\/li>\n\n\n\n<li><strong>Expected Interest Rate Cuts<\/strong><\/li>\n\n\n\n<li><strong>Strong Contributions from SLM<\/strong><\/li>\n\n\n\n<li><strong>Diversified Product Portfolio<\/strong><\/li>\n<\/ol>\n\n\n\n<h3 class=\"wp-block-heading\">Key Risks<\/h3>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Economic Slowdown Impacting Sales<\/strong><\/li>\n\n\n\n<li><strong>Increase in Raw Material Prices<\/strong><\/li>\n\n\n\n<li><strong>Competition from Smuggled tyres\/Imports<\/strong><\/li>\n\n\n\n<li><strong>Higher Energy Costs<\/strong><\/li>\n\n\n\n<li><strong>Delays in Project Commissioning<\/strong><\/li>\n\n\n\n<li><strong>Changes in Regulatory Regimes<\/strong><\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">SLM: A Key Contributor to Growth<\/h2>\n\n\n\n<p>SLM is the only TBR tyre producer in the country, catering to both local and international markets. The company started with an initial capacity of 0.6 million tyres per annum, with plans to increase it to 1.2 million tyres in phase II and 2.4 million tyres in phase III. Currently, SLM has a production capacity of 0.74 million tyres per annum, operating at optimal utilization.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Expansion Plans<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Phase II:<\/strong> Expected to start commercial production in CY25, with an estimated capex of PKR 8.0 billion.<\/li>\n\n\n\n<li><strong>Future Investments:<\/strong> Plans to invest PKR 30 billion to start exporting specialized tyres to the EU and USA.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Recent Performance<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Topline:<\/strong> PKR 33.1 billion over the last four quarters.<\/li>\n\n\n\n<li><strong>PAT:<\/strong> PKR 4.4 billion over the last four quarters, depicting a net margin of <strong>13%<\/strong>.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Tyre Segment: Strengthening Market Position<\/h2>\n\n\n\n<p>SRVI\u2019s tyre division remains a major growth driver, with unconsolidated revenue of PKR 36 billion in CY23, up by approximately <strong>29%<\/strong> YoY.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Market Share<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Domestic Market:<\/strong> Holds over <strong>50%<\/strong> market share in motorcycle tyres and tubes, <strong>20%<\/strong> in agricultural tyres, and<strong> 25%<\/strong> in TBR tyres.<\/li>\n\n\n\n<li><strong>Exports:<\/strong> Constitutes around <strong>31%<\/strong> of the country\u2019s total tyre and tube exports.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Capacity Expansion<\/h3>\n\n\n\n<p>To meet rising demand in the agricultural division, SRVI is increasing its capacity by <strong>10%<\/strong>, with an estimated capex of PKR 0.6 billion, expected to come online by the end of CY24.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Footwear Segment: Retail Network Expansion<\/h2>\n\n\n\n<p>SRVI\u2019s footwear segment saw a <strong>45%<\/strong> increase in CY23, driven by a <strong>56%<\/strong> YoY growth in local sales, supported by the expansion of its retail network from 152 stores in Dec 22 to 232 stores in Dec 23.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Future Plans<\/h3>\n\n\n\n<p>The company aims to increase the number of retail stores to 300 by the end of CY24 and 350 by the end of CY25.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Financial Outlook and Strategic Moves<\/h2>\n\n\n\n<p><a href=\"https:\/\/ksestocks.com\/blog\/tag\/srvi\/\" target=\"_blank\" rel=\"noopener\" title=\"SRVI\">SRVI<\/a>\u2019s debt-to-asset ratio stands at <strong>49%<\/strong> as of 1QCY24, with finance costs comprising <strong>52%<\/strong> of operating profit. With expected reductions in interest rates, the financial burden is likely to decrease, enhancing profitability. In CY23, finance costs were PKR 3.2 billion, up by <strong>35%<\/strong> YoY. A 1% reduction in interest rates could have an after-tax impact of PKR 2.71 per share.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Exploring New Segments<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Motorcycle Chains and Sprockets:<\/strong> The segment posted revenue of PKR 3.2 billion in CY23.<\/li>\n\n\n\n<li><strong>Apparel Range:<\/strong> Initial positive response from selected stores in Lahore, with plans to expand to 11 additional cities.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Transition to Normal Tax Regime<\/h3>\n\n\n\n<p>The proposed federal budget for 2024-25 includes a shift to a normal tax regime for exporters, with minimal impact on SRVI due to SLM\u2019s tax exemption.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Current Market Data<\/h2>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table><thead><tr><th class=\"has-text-align-left\" data-align=\"left\">Metric<\/th><th class=\"has-text-align-left\" data-align=\"left\">Value<\/th><\/tr><\/thead><tbody><tr><td class=\"has-text-align-left\" data-align=\"left\">Current Price<\/td><td class=\"has-text-align-left\" data-align=\"left\">PKR 950<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Market Cap (PKR billion)<\/td><td class=\"has-text-align-left\" data-align=\"left\">44.6<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Market Cap (USD million)<\/td><td class=\"has-text-align-left\" data-align=\"left\">159<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Free Float Market Cap<\/td><td class=\"has-text-align-left\" data-align=\"left\">USD 79.7 million<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">30-day Avg. Turnover<\/td><td class=\"has-text-align-left\" data-align=\"left\">0.03 million shares<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">52-week Range<\/td><td class=\"has-text-align-left\" data-align=\"left\">PKR 248-1,038<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Shares Outstanding<\/td><td class=\"has-text-align-left\" data-align=\"left\">47 million<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Free Float Percentage<\/td><td class=\"has-text-align-left\" data-align=\"left\">50%<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\"><strong>Source:<\/strong> <em>Company Accounts, Insight Research<\/em><\/figcaption><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Financial Projections<\/h3>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table><thead><tr><th class=\"has-text-align-left\" data-align=\"left\">Financial (PKR million)<\/th><th class=\"has-text-align-left\" data-align=\"left\">CY23<\/th><th class=\"has-text-align-left\" data-align=\"left\">CY24F<\/th><th class=\"has-text-align-left\" data-align=\"left\">CY25F<\/th><th class=\"has-text-align-left\" data-align=\"left\">CY26F<\/th><\/tr><\/thead><tbody><tr><td class=\"has-text-align-left\" data-align=\"left\">Sales<\/td><td class=\"has-text-align-left\" data-align=\"left\">96,521<\/td><td class=\"has-text-align-left\" data-align=\"left\">117,592<\/td><td class=\"has-text-align-left\" data-align=\"left\">146,330<\/td><td class=\"has-text-align-left\" data-align=\"left\">166,043<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Cost of Sales<\/td><td class=\"has-text-align-left\" data-align=\"left\">74,670<\/td><td class=\"has-text-align-left\" data-align=\"left\">88,974<\/td><td class=\"has-text-align-left\" data-align=\"left\">111,017<\/td><td class=\"has-text-align-left\" data-align=\"left\">125,664<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Gross Profit<\/td><td class=\"has-text-align-left\" data-align=\"left\">21,850<\/td><td class=\"has-text-align-left\" data-align=\"left\">28,618<\/td><td class=\"has-text-align-left\" data-align=\"left\">35,312<\/td><td class=\"has-text-align-left\" data-align=\"left\">40,379<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Finance Cost<\/td><td class=\"has-text-align-left\" data-align=\"left\">7,547<\/td><td class=\"has-text-align-left\" data-align=\"left\">5,634<\/td><td class=\"has-text-align-left\" data-align=\"left\">4,910<\/td><td class=\"has-text-align-left\" data-align=\"left\">4,788<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">PBT<\/td><td class=\"has-text-align-left\" data-align=\"left\">5,742<\/td><td class=\"has-text-align-left\" data-align=\"left\">11,416<\/td><td class=\"has-text-align-left\" data-align=\"left\">15,289<\/td><td class=\"has-text-align-left\" data-align=\"left\">17,606<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">PAT<\/td><td class=\"has-text-align-left\" data-align=\"left\">4,298<\/td><td class=\"has-text-align-left\" data-align=\"left\">10,103<\/td><td class=\"has-text-align-left\" data-align=\"left\">14,229<\/td><td class=\"has-text-align-left\" data-align=\"left\">16,095<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\"><strong>Source:<\/strong> <em>Company Accounts, Insight Research<\/em><\/figcaption><\/figure>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table><thead><tr><th class=\"has-text-align-left\" data-align=\"left\">Key Ratios<\/th><th class=\"has-text-align-left\" data-align=\"left\">CY23<\/th><th class=\"has-text-align-left\" data-align=\"left\">CY24F<\/th><th>CY25F<\/th><th>CY26F<\/th><\/tr><\/thead><tbody><tr><td class=\"has-text-align-left\" data-align=\"left\">EPS (PKR)<\/td><td class=\"has-text-align-left\" data-align=\"left\">60.5<\/td><td class=\"has-text-align-left\" data-align=\"left\">134.2<\/td><td>187.5<\/td><td>204.7<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">DPS (PKR)<\/td><td class=\"has-text-align-left\" data-align=\"left\">10.0<\/td><td class=\"has-text-align-left\" data-align=\"left\">20.0<\/td><td>50.0<\/td><td>72.0<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Dividend Yield<\/td><td class=\"has-text-align-left\" data-align=\"left\">2%<\/td><td class=\"has-text-align-left\" data-align=\"left\">2%<\/td><td>5%<\/td><td>8%<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">P\/E<\/td><td class=\"has-text-align-left\" data-align=\"left\">9.8<\/td><td class=\"has-text-align-left\" data-align=\"left\">7.1<\/td><td>5.1<\/td><td>4.6<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">P\/BV<\/td><td class=\"has-text-align-left\" data-align=\"left\">1.5<\/td><td class=\"has-text-align-left\" data-align=\"left\">1.6<\/td><td>1.1<\/td><td>0.8<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">ROE<\/td><td class=\"has-text-align-left\" data-align=\"left\">23%<\/td><td class=\"has-text-align-left\" data-align=\"left\">36%<\/td><td>36%<\/td><td>31%<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\"><strong>Source:<\/strong> <em>Company Accounts, Insight Research<\/em><\/figcaption><\/figure>\n\n\n\n<p><strong>Disclaimer:<\/strong><\/p>\n\n\n\n<p><em>The information in this article is based on research by Insight Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The research house has raised its Dec 24 SRVI target price to Rs. 1438 per share.<\/p>\n","protected":false},"author":8,"featured_media":5439,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[155],"tags":[254],"class_list":["post-5840","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fundamental-analysis","tag-srvi"],"featured_image_src":{"landsacpe":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/05\/SRVI-Fundamental-Analysis-1140x445.png",1140,445,true],"list":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/05\/SRVI-Fundamental-Analysis-463x348.png",463,348,true],"medium":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/05\/SRVI-Fundamental-Analysis-300x188.png",300,188,true],"full":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/05\/SRVI-Fundamental-Analysis.png",1920,1200,false]},"_links":{"self":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/5840","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/comments?post=5840"}],"version-history":[{"count":0,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/5840\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media\/5439"}],"wp:attachment":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media?parent=5840"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/categories?post=5840"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/tags?post=5840"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}