Stylam Industries Q3 Results Review - Current Weakness Transient; Healthy Traction In Exports: Systematix

Systematix Report

Stylam Industries Ltd.’s reported strong 22.3% Ebitda margin in Q3 despite a soft and inline laminate-volume/revenue (down 8% YoY, Rs 200 million sales loss due to Israel war). Exports is now showing strong visibility with healthy enquiries for sourcing from global original equipment manufacturers.

Despite well spread distribution, warehousing and branding efforts, domestic laminate business is taking time to scale up fast due to stiff competition. Prices of key raw materials are stable now; management is hopeful to maintain its Ebitda margin at 20% plus after reporting 22.3%/20.3% in Q3 /nine months FY24.

It has increased its laminate’s greenfield capex to Rs 2 billion (from Rs 1.5 billion earlier) by adding one more production line to 4 now. Likely operational in Q3 FY25, the new facility will have Rs 6 billion plus revenue potential (at 3 times average turnover).

Scale up will be fast as ~50% capacity is already booked from export customers. In acrylic solid surface, despite slow start (nine months FY24: Rs 200 million), Stylam Industries is confident of achieving Rs 3 billion plus revenue from the segment over the next three years. Focus of sales under own Granex brand over OEM sales has led to longer time in scale up.

We broadly maintain estimates and expect laminate-volume/ revenue/ profit after tax compound annual growth rate of 16%/17%/29% over FY23-26E (FY18-23: 12%/ 23%/26%/ 37%), with strong operating cash flow , and return on capital employed (35% in FY26E).

We remain sanguine on the company's prospects and maintain; 'Buy' with an unchanged target price of Rs 2,199 (18 times FY26E price/earning).

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