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Result Synopsis

Greenlam Industries Ltd (GRLM) registered a steady quarter wherein revenues increased by 17%YoY. Laminates sales (88% of revenue) grew by 13%YoY backed by stellar growth in export markets (53.5% of laminates revenue) wherein revenue increased by 22%YoY owing to 14%YoY volume growth (42% of laminate volumes) on the back of company’s expanding market share and ramp-up of south plant. Moreover, GRLMs improving product-mix in export segment enabled them to expand their ASP to Rs1,392/sheet Vs Rs1,290/Rs1,144 in Q1FY24/Q4FY24 respectively. During the quarter sales of Rs150Mn were not recorded due to container availability issues. Demand in domestic markets was also steady which led to volume growth of 11%YoY (2-year CAGR stood at 15%). However, ASP in domestic markets declined to Rs5%YoY to Rs895/sheet. Consequently, domestic laminate revenue (46.5% of laminates sales) grew marginally by 4%YoY.

During the quarter, higher freight cost, lower volumes, and increase in employee cost resulted into contraction in operating margins to 13.6% for laminates Vs 14.8%/16.6% in Q1FY24/Q4FY24 respectively & overall margins came in at 10.6% as compared to 12.5%/13.4% in Q1FY24/Q4FY24 respectively. The impact of higher cost on gross margins was cushioned owing to better product-mix in export markets

Plywood (5th quarter of operations) volumes stood at 1.14msqm an improvement of 10%QoQ. GP margins came in at 51% and EBITDA loss stood at Rs61Mn which was impacted due to higher timber cost. Veneer and allied segment’s revenue stood at Rs428Mn, remaining flattish on YoY basis. EBITDA loss came in atRs27Mn Vs loss of Rs16Mn in Q1FY24 & profit of Rs20Mn in Q4FY24.

Net debt stood at Rs9.21Bn which includes debt of Rs4.65Bn relating to particle board project. The particle board plant at Andhra Pradesh is expected to commence from Q3FY25E. Working capital days improved to 65-days Vs 72-days in Q1FY24

Management reiterated their overall growth guidance of 18-20% for FY25E with an EBTIDA margin of ~15-16% for laminates. On Net-debt, management believes the peak will be Rs9.5Bn in FY25E and from next fiscal the same should contract as there is no major capex post the Particle Board plant.

We expect a Revenue/EBITDA/PAT growth of 22%/26%/25% respectively over FY24-FY26E. We have revised our FY25E EPS downwards due to lower margins from 15.5% to 15% for laminates. At CMP, the stock trades at rich P/E(x) of 33x on FY26E EPS of Rs16.9. Hence, we maintain our SELL rating on the stock by valuing the company at P/E(x) of 30x on FY26E EPS.

Result Highlights

* Revenue stood at Rs6.05Bn (5% above est), a growth of 17%YoY & decline of 3%QoQ.

* EBITDA margins came in at 10.6% (est of 13%) Vs 12.5%/13.4% in Q1FY24/Q4FY24 respectively on account of higher operating expenses. Absolute EBITDA stood at Rs640Mn, flattish YoY growth and a decline of 23% on sequential basis.

* Net profit stood at Rs199Mn, a massive decline of 40%YoY & 51%QoQ.

Segmental Highlights for Q4FY24

* Laminates & Allied segment (88% of total revenue)- Revenue grew by 13%YoY & remained flattish QoQ to Rs5.34Bn (2-year CAGR at 11%), primarily driven by exports business. Volumes increased by 12%YoY & decreased by 11%QoQ (2-year CAGR at 9%) to 4.7Mn sheets. EBIT margin came in at 16.4% Vs 18.5%/19.8% for Q1FY24/Q4FY24, respectively. Absolute EBIT remained flattish YoY & decreased by 17%QoQ to Rs878Mn.

* Veneers & Allied segment (10% of total revenue)- Revenue for the segment stood at Rs428Mn, flattish YoY & a decline of 30%QoQ. Company registered a EBIT loss of Rs26Mn as compared to a loss of Rs14Mn in Q1FY24 & a profit of Rs21Mn in previous quarter.

* Plywood- Revenue increased by 5%QoQ to Rs276Mn. Greenlam reported an EBIT loss of Rs68Mn in Q1FY25 Vs a loss of Rs85Mn in Q4FY24.

Other Key Highlights

* Q1FY25 saw highest ever revenues from the exports business for the laminates segment at Rs2.9Bn, up 22%YoY & 5%QoQ. In volume terms, exports grew by 14%YoY.

* Net working capital days contracted to ~65 days for Q1FY25 Vs ~72 days in Q1FY24.

* Net debt was Rs9.22Bn which includes particle board project debt of Rs4.65Bn

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