Neutral Greenlam Industries Ltd For Target Rs.478 -Yes Securities
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Enhanced Laminate capacity and foray into new products categories to drive growth!
Result Synopsis
GRLM reported stellar numbers wherein laminate volumes grew by 16%YoY & 18%QoQ (4-year CAGR stood at 10%) largely driven by robust domestic volumes which increased by 21%YoY & 14%QoQ. Export volumes registered a growth of 10%YoY & 25%QoQ. Laminates EBITDA margins came in at 16.4% as compared to 12.1%/14.8% in Q2FY23/Q1FY24 respectively. Consequently, EBITDA/sheet came in at Rs177 Vs Rs134/Rs168 in Q2FY23/Q1FY24 respectively. During the quarter, GRLM commenced production of new laminate unit at Naidupeta wherein total capacity is 3.5mn sheets p.a, taking the company’s total laminate capacity to 24.52mn sheets (largest in India). During the quarter, working capital stood at 60-days & net debt as on came in at Rs6.69Bn (including project debt of Rs5.49Bn).
Company has escalated capex cost of Particle Board unit by Rs1.75Bn. Moreover, GRLM announced further capex of Rs Rs300Mn/Rs350Mn for Plywood/Laminates unit respectively. This capex will be funded via mix of debt & internal accruals. Further management reiterated their annual guidance of 20%YoY revenue growth for FY24E with an EBITDA margin of 13-14%.
We believe company will deliver laminate volume growth of 20%CAGR over FY23- FY25E owing to healthy demand in both domestic & export market. Moreover, with higher contribution from value-added products & better utilization, laminate segment’s margins are expected to improve gradually. GRLM’s particle board plant will commence from FY25E & boost the topline growth, but we believe the same will be profitable from Year-2 of operations. Overall, we expect Revenue/EBITDA/PAT growth of 28%/32%/30% respectively over FY23-FY25E. At CMP, the stock trades at rich P/E(x) multiple of 28x on FY25E EPS of Rs17. We have revised our target price to Rs478 (upwards by 4%), hence we have assigned a NEUTRAL rating to the stock.
Result Highlights
* Consol revenue stood at Rs6.04Bn (9% higher than our est), reporting a growth of 16% YoY & 17%QoQ.
* EBITDA margin came in at 12.5% (v/s our est of 12.6%) as compared to 10.4%/12.5% in Q2FY23/Q1FY24 respectively. Absolute EBITDA grew by 41%YoY & 18%QoQ to Rs756Mn.
* PAT stood at Rs394Mn, growth of 35%YoY & 22%QoQ.
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SEBI Registration number is INZ000185632
