Stylam Industries Research Report By IDBI Capital

Stylam Industries Ltd. (Stylam), manufacturer of high pressure decorative laminates for home and industry use, derives over 70% of revenue from export market from over 60 countries. The company is doubling its capacity to nearly 12 mn sheets with a greenfield project at an estimated capex of ~Rs600 mn, which is likely to complete by July 2016. Almost 35% of the new capacity is dedicated to wider sheet (14ftX6ft), where Stylam would be pioneer in India and has a huge demand in export market (commands 10%-15% premium over regular sheets). Further, the company is strengthening its presence in domestic market with direct penetration (gradually phasing out distributors), giving better margin and higher brand recall. The company opened 25 branches within a couple of years and likely to expand upto 40 within a year. Further, implementation of GST would change the landscape of entire highly unorganized (65%) industry and could act as a key catalyst for significant re-rating. As the major capex is getting over along with improving working capital & return ratio, FCF is set to improve from FY18. Its revenue/EBITDA/PAT has grown at a CAGR of 27%/30%/50% during FY12-FY15 and we expect it to grow at 23%/27%/29% during FY15-FY18. The stock is currently trading at a P/E of 11.8x/8.4x to FY17E/FY18E earnings. Initiate with a BUY rating (TP Rs355/share on P/E multiple of 13x FY18E; 54% upside).