Stylam Industries Ltd
Laminates / Decoratives
Stock Info
Shareholding Pattern
Price performance
Indexed Stock Performance
Solid Q4 earnings, robust outlook intact
Company profile
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.
Investment Arguments
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
- Stylam’s exports may be impacted due to a slowdown in the global economy.
- Raw material risks arising from supply chain constraints and the surge in oil prices can potentially hurt the near‐term growth prospects of Stylam.
- Fragmented nature of the industry: The domestic laminates industry is highly fragmented with the majority of the sector comprising unorganized players. Competition from both organized as well as unorganized players leads to pricing pressure for the players in the industry
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.