Stylam Industries Ltd (SIL) was set up by late Mr. NR Aggarwal in 1991 along with his sons, Mr. Jagdish Gupta and Mr. Satish Gupta, by the name of Golden Laminate Private Limited. It was converted into a Public Limited Company in the year 1992 and was listed on the Bombay Stock Exchange in 1995. The company changed its name from Golden Laminates Limited to Stylam Industries Limited in January 2010. The company is engaged in the manufacturing of decorative laminates under the brand name “STYLAM” and exports its products primarily to European and South East Asian countries. The products of the company find application in the furniture and real estate industry. Stylam has manufacturing units in Panchkula, Haryana, with an installed capacity of 14.3 million sheets per annum.
Stylam Industries is one of the fastest-growing companies in the high-quality decorative laminates and allied products industry. The company operates Asia’s largest single location laminate manufacturing plant with a diverse product portfolio, catering to a wide range of customer preferences, built with over 32 years of experience in the industry. SIL diversified into a new segment and added a short cycle press capacity for the lamination of impregnated paper on Medium Density Fiber (MDF) panels.
An established player in the luxury grade laminates space for 3 decades
Stylam is a prominent player in global markets in the high-quality decorative laminates and allied products industry. Stylam’s manufacturing capacity enables it to supply products to its customers around the globe. It has a robust and resilient network of distributors and a strong worldwide and local supply chain. Its operations span 80 countries, with the majority of its customers being in Europe, North America, Russia, the Middle East, and Africa. In the export segment, demand is buoyant on account of the shift from wood-based panel products to engineered panels like Medium Density Fibre (MDF) and particle board. In the domestic market, Stylam’s distributors and C&F agents, along with inventory management remain its strong business enablers. Stylam has expanded its pan‐India footprint by designing a product range that has become a benchmark in the laminate and adhesive industry.
Increase in value-added SKU’s
Stylam boasts a wide range of high-pressure laminates with over 1500+ Designs and 150+ textures and finishes. Products such as exterior laminates, bathroom cubicles, and acrylic solid surfaces continue to find increasing acceptance in its markets. Stylam’s research and development standards are best‐in‐class and attuned to evolving market demand and customer preferences across geographies. The value-added category accounted for c.10% of Stylam revenue five years ago and is 25% at present. Also; recently it added India’s first Acrylic Solid surface plant having a revenue potential of Rs 4-5bn. We believe the Greater mix of value-added SKUs will further boost SYIL’s market positioning, margins, and return ratios.
Growing domestic market
The demand for residential infrastructure has greatly increased due to the rise in the global population and the growth of nuclear households. This has fuelled the use of decorative laminates on floors, walls, doors as well as windows. An increase in the number of hotels and restaurants that majorly use acrylic solid surfaces for countertops, furniture, wall claddings, exterior facades, etc is a key factor for boosting the growth of the global acrylic solid surface market.Growing urbanization, infrastructure development, and technological advancements are some of the other factors that are anticipated to contribute to the growth of the global acrylic solid surface market.
The beneficiary of the china+1 strategy
Global customers are looking for alternatives to China, high laminates import into the US, the energy crisis in Europe leading to shifting towards outsourcing, and strong real estate prospects in the Middle East and North America. SIL is looking to participate in exhibitions globally to expand its markets.
Vision 2022‐25: Expansion and deleveraging
Stylam has recently expanded its laminate production line. It proposes to expand into the plywood segment under a wholly-owned subsidiary. Stylam proposes to be a net debt-free company over the period FY2022-25. Plywood is popular in the housing market while MDF has gained approval in large commercial spaces. As a natural extension to the laminate business, Stylam expects to leverage its strong distribution network and brand association in the country, which will help reduce the gestation period of the plywood and allied product business. The company is in the process of expanding its existing capacities by 40% which will entail a capex of Rs400Mn (50% done). Additionally, SIL has decided to set up a new laminates plant for which the company will spend Rs1.5Bn which can deliver Rs5Bn revenue at peak (in the next 2-3 years). This plant will largely cater to the export demand & will be value-added products.
Q4FY23 Financial Performance Analysis
Stylam maintained its strong performance in the fourth quarter with consolidated sales of Rs.237 cr, implying a growth of 32% YoY. Sales growth during the quarter was backed primarily by exports, which were Rs.151 cr (36% YoY growth). Further, domestic sales also witnessed a significant uptick, clocking sales of Rs.86 cr (25 % YoY). The company sold 2.73 million laminate sheets during the fourth quarter of Q4FY23 (vs. 2.3 million in Q4FY22; a 19% YoY growth). Further, EBITDA for the quarter stood at Rs.40 cr which doubled on a YoY basis. In terms of margins, it stood at 17.11% (vs. 16.82% in Q3FY23 and 11.02% in Q4FY22). PAT surged 59% to Rs.27 cr YoY aided by solid revenue growth and good operational performance.
Key Risks & Concerns
Outlook & valuation
Strong relationships with distributors, low-cost manufacturing and customers’ China+1 strategy, focus on High value products, capacity expansion, Distribution expansion, good demand in domestic & export market, and unorganised to organized shift are key factors that could drive the stock. At a CMP of Rs.1330, the stock is currently trading at 15x FY25E (EPS – Rs.89) which appears reasonable. Hence, we recommend a BUY rating on the stock.