Greenlam Industries : Estimates beaten, healthy performance to continue; maintaining a Buy - Anand Rathi Share and Stock Brokers Ltd
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Estimates beaten, healthy performance to continue; maintaining a Buy
Greenlam’s Q2 revenue, EBITDA and PAT grew respectively 14%, 17% and 41% y/y to Rs5,180m, Rs537m and Rs292m, 4.3%/6.4% ahead of ARe revenue/PAT. Slight relief in input costs and from the product-mix change expanded the gross margin 104bps y/y to 44.6%. Higher other operating expenses restricted the EBITDA margin expansion to 10.4%. PAT grew a significant 41% y/y, led by higher other income and lower tax expense.
Capacity constraints in Laminates alleviated. The acquired laminate capacity (3.4m sheets) commenced production. Utilisation was lower due to enhanced capacity and lower off-take. Sales volumes were down 10% y/y and realisation rose 27% y/y, lifting revenue 14% y/y. The margin improved 68bps y/y to 12.1%, but q/q was 28bps lower.
Veneers: Utilisation improves, losses mount. Capacity utilisation improved 476bps y/y, resulting in 14.7% and 14.3%% y/y increases in production and sales volumes respectively. Realisations improved 6% y/y. This led to revenue increasing 18.5% y/y, which however could not curb losses doubling to Rs32m.
Project commissioning to enhance growth trajectory. The ramp-up of the Prantij, Gujarat, laminate plant (from 3.4 to 5.4m sheets) would be complete by Q4 FY23. The plywood projects in Tamil Nadu (Q4 FY23) and the laminate/particle board projects in Andhra Pradesh (Q4 FY23/Q4 FY24) are in full swing and commissioning is likely to be as scheduled.
Valuations. Outlook intact, maintaining a Buy. We revisit our FY23/FY24 figures and incorporate FY25e. We expect 28%/32% revenue/earnings CAGRs over FY22-24. We are upbeat about the company and maintain our Buy recommendation on it, with a higher target price of Rs.501 based on 30x FY25e earnings (earlier Rs472 based on 33x FY24e earnings). Risks: Demand slowdown, keener competition and cost pressures.
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