We are pleased to inform you that our Hidden Gem stock of April 2016 - Stylam Industries Ltd (BSE Code: 526951) which was released on 8th May'16 has given absolute returns of 177% to our Hidden Gems members in period of 3 months. Our team suggested Buy on Stylam Industries Ltd at price of Rs. 217.80 on 08 May'16 with a target price of Rs. 430. We are glad to inform our readers that stock has already achieved its target price in matter of 2 months, stock has recently made its 52 week high of Rs. 625 and currently trading at Rs. 604 giving as on date absolute returns of 177% to our Hidden Gems members in period of 3 months. We have not suggested any profit booking considering robust growth outlook of the company in long term and suggest our members to continue to hold the stock.
In Jun'16 quarter, net profit of Stylam Industries rose 79.93% to Rs 4.93 crore in the quarter ended June 2016 as against Rs 2.74 crore during the previous quarter ended June 2015. Sales rose 16.10% to Rs 70.03 crore in the quarter ended June 2016 as against Rs 60.32 crore during the previous quarter ended June 2015. Company has delivered much better revenue growth with significant improvement in margins compared to other bigger players like Century Plyboards and Greenlam.
In FY15-16, net profit rose 29.39% to Rs 12.15 crore in the year ended March 2016 as against Rs 9.39 crore during the previous year ended March 2015. Sales rose 16.45% to Rs 249.41 crore in the year ended March 2016 as against Rs 214.17 crore during the previous year ended March 2015.
Stylam Industries has delivered consistent profit growth of 25.2% over 5 years and growth prospects of the company look bright. Stylam is a manufacturer of high pressure decorative laminates and has almost doubled its capacity recently. This segment has more unorganised players (almost 65%) while Stylam is the organised player in the sector and will directly benefit with implementation of GST.
Once the GST comes into force, the tax advantage currently enjoyed by the unorganised players would diminish sharply and the market share of the organised players would surge. Moreover, the government imposed a heavy anti dumping duty on imports of medium density fibre board (MDF), mainly used in decorative furniture. Anti-dumping duty on plain MDF Board (also known as custom-wood or craft-wood) will be levied on boards having a thickness of 6mm or above and will be valid for five years. The duty is highly positive for domestic players in laminate and plywood segment as these companies will be able to improve their business margins going forward.
Below is the summary of Stylam Industries Ltd shared by our team under Hidden Gem stock of April'16 released on 08th May 2016.
Note: This report is shared only for the purpose of information and not an investment advice. Kindly carry out your own due diligence in case of investment in Stylam Industries.
Stylam Industries Limited (Stylam) manufactures high pressure laminates for home and industry use, under the brand name ‘STYLAM’. It offers decorative, compact industrial, fire retardant, fabric based, post forming, cabinet liner and metal laminates. These products constitute basic interior building materials responsible for residential and commercial space attractiveness, safety and security.
- Design & Style Trends – New colours and patterns representing style and panache must continue to hit the market. These products must also score high on longevity and usability.
- Global Accessibility – Many companies are looking to target the international markets by developing unique collection of product range for Europe, Asia and North America.
- Technology – Various companies that produce High Pressure Laminates are now looking to implement various technologies to create products where solid colours coordinate with patterns to provide a better end product.
India is the one of the largest exporters of the laminates in the world. Players with the establish track record of delivering quality products in the export markets, including Stylam have been consistently able to register growth in turnover over the years despite the global slowdown though the prospects of the company will be primarily driver by the demand from the real estate sector and its ability to manage currency fluctuations.
2. Recent Developments:
i) Stylam Industries wins Power Brand Rising Star Award 2016 – 11th Apr 2016
3. Financial Performance:
Stylam Industries standalone net profit rises 7.35% in the December 2015 quarter
Net profit of Stylam Industries rose 7.35% to Rs 2.92 crore in the quarter ended December 2015 as against Rs 2.72 crore during the previous quarter ended December 2014. Sales rose 7.67% to Rs 58.09 crore in the quarter ended December 2015 as against Rs 53.95 crore during the previous quarter ended December 2014.
Stylam Industries standalone net profit rises 13.30% in the September 2015 quarter
Net profit of Stylam Industries rose 13.30% to Rs 2.64 crore in the quarter ended September 2015 as against Rs 2.33 crore during the previous quarter ended September 2014. Sales rose 17.26% to Rs 60.25 crore in the quarter ended September 2015 as against Rs 51.38 crore during the previous quarter ended September 2014.
With growing demand of HPL (High Pressure Laminates) globally, Stylam achieved revenue of Rs. 178 crores from exports in FY 14-15, which is 78.25% of its total revenue. This is expected to increase significantly as company plans to increase its exports to almost 100 countries in this fiscal year.
As company has doubled its capacity recently, we believe company will post decent growth sales and profits in coming quarters.
4. Peer Group Comparison:
On valuation parameters, we find Stylam Industries trading at significant discount compared to other listed players in the Industry. Moreover, important financials like OPM (operating profit margin) and ROE (return on equity) of Stylam are better compared to Greenlam Industries. Also once recent capacity expansion is completed, Stylam Industries Laminate capacity will be at par with Greenlam Industries
(as on 08 May'16)
v) Apart from Laminate business, Stylam has also set up a new building having built up areas of 2.23 Lacs square foot at Panchkula IT Park, Haryana. Company has planned to lease out the major portion of this built up areas to other players for commercial office space and for service sector business which will boost company’s revenue growth and profitability going forward.
Considering high earning visibility and attractive valuations of the company compared to other peer companies, growing demand of decorative laminates globally and company’s plan to extend its outreach to domestic market along with exports with recent capacity expansion, Saral Gyan team recommends “Buy” on Stylam Industries Ltd at current market price of Rs. 217.80 for target of Rs. 430 over a period of 12 to 24 months.
- 75% at current market price of 217.80
- 25% at price range of 190-195 (in case of correction in stock price in near term)
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