Greenlam Industries Ltd - Q2FY21 Result Update - YES Securities

Highlights

- Relief in national and regional lockdowns led to restoration of demand during Q2 but sales were below pre-COVID levels. During the quarter domestic / international revenues in laminate business were ~82% / 93% as compared to last year.

- Revenue in Q2 stood at Rs 2,893 Mn - decline of 17.1% y/y and growth of 80.4% q/q. Laminates sales declined by 12.7% y/y wherein domestic / exports sales de-grew by 18.8% / 6.9% y/y respectively. The sales of Veneer / Wood flooring / Doors segment de-grew by 51% / 38.9% / 13.6% y/y respectively.

- Gross profit margins (GP%) came in at 49% Vs 47.1% / 49.7% in Q2FY20 / Q1FY21 respectively. Laminates GP% contracted sequentially from 50.5% to 49.9% on the back of change in product mix wherein 0.7mm laminates constituted major portion of sales leading to 5% q/q fall in realizations. Operational margins improved sequentially to 14% during Q2 from 4.9% and remained flat as compared to Q2FY20. EBIDTA in absolute terms stood at Rs 405 Mn - a decline of 16.6% y/y and growth of 415% q/q.

Our View

- Management has stated that business during October 2020 is in-line with October 2019. This invigorates our confidence w.r.t future outlook as we expect a sharp re-bound in domestic business led by urban areas scaling to normalcy in operations from Q3FY21E onwards.

- Accordingly, we upgrade our EBITDA estimate by 43% for FY21E and factor in top-line/EBITDA growth of 16.5%/28% CAGR over FY21E-FY23E.

- Despite cash outgo of ~Rs 1.6 bn over FY21E-FY23E towards commissioning of Andhra plant and maintenance capex, we expect net debt/equity to decline from 0.3x to 0.09x over the same period led by strong internal accruals.

Valuation

- Rolling forward to Sep-22E, we upgrade our TP from Rs 1,031 to Rs 1,165 - assigning DCF derived P/E multiple of 25x. We maintain our BUY rating (+55% potential upside).

Risk to our call

- Second wave of COVID-19 spread in India

Shares of Greenlam Industries Ltd was last trading in BSE at Rs.749.1 as compared to the previous close of Rs. 755.4. The total number of shares traded during the day was 1100 in over 32 trades.

The stock hit an intraday high of Rs. 795 and intraday low of 741.6. The net turnover during the day was Rs. 822785.

Source : Equity Bulls

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