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Result Synopsis

Stylam Industries Ltd (SYIL), registered benign performance in Q1FY24. Revenue declined by 4%YoY & 5%QoQ (4th straight quarter of sequential revenue decline), which was primarily on account of 12%YoY decline in exports (66% of topline). However domestic sales (34% of revenue) increased by 16.7%YoY. Overall volumes stood at 2.8Mn sheets, a growth of 3.7%YoY & 2.6%QoQ (2-year CAGR stood at 25%). ASP came in at Rs772/sheet Vs Rs856/Rs835 in Q1FY23/Q4FY23 respectively, the contraction in ASP was largely owing to change in product-mix. Domestic volumes stood at 1.4mn sheets, a growth of 75%YoY & Export volumes declined by 13%YoY. GP% contracted QoQ by ~82bps but EBITDA margins improved by 140bps to 18.5% (highest in 6-quarters) over similar period due to lower other expenses. During the quarter, NWC-days improved to 92 Vs 93 in previous quarter & net debt stood at - Rs270Mn.

We expect company’s Revenue/EBITDA/PAT to grow by 18%/24%/25% respectively over FY23-FY25E. Laminates volume/realization is likely to grow by 13%/1% respectively over similar period. The growth will largely be driven by expansion of SYIL’s presence in domestic markets coupled with steady demand in export markets. Improvement in ASP is expected due to growing share of value-added products. Incremental capacities (40% additional brownfield & greenfield expansion) will enable SYIL to cater the growing demand. We have cut our EPS estimates by 5% for FY24 due to subdued demand but we maintained our EPS estimate for FY25 of Rs88. We continue to value the company at P/E(x) of 20x on FY25 EPS & maintain our target price of Rs1,767. Hence, we have assigned an ADD rating to the stock.

Result Highlights

* Revenue for the quarter stood at2.25Bn, a decline of 4%YoY & 5%QoQ (Vs est of 2.46Bn).

* EBITDA margins came in at 18.5% Vs 15%/17% in Q1FY23/Q4FY23 respectively (Vs est of 17.1%). Though GP margins contracted sequentially, Improvement in operating margins was largely on account of lower other expenses. Absolute EBITDA increased by 18%YoY & 3%QoQ to Rs418Mn.

* Net profit stood at Rs278Mn, a growth of 32.5%YoY & 4%QoQ (Vs est of Rs285Mn).

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