Stylam Industries Receives Buy Call for 65% Upside – Are You Holding?

A brokerage firm has issued a buy call on a small cap stock, projecting a potential upside of 65%. This recommendation is based on the company’s impressive growth in the industry and robust EBITDA margin. Opening at Rs. 1,575.05 on Tuesday, the stock had a previous closing price of Rs. 1,588.90. HDFC Securities maintains a ‘buy’ rating on Stylam Industries with an unchanged target price of Rs. 2,550 per share, indicating a substantial upside from the current stock price.

Despite facing an 8.11% decline in revenue both QoQ and YoY due to weakened domestic demand and lower export sales amid the Israel-Palestine conflict, the company showcased a QoQ recovery for the 7th consecutive quarter. The EBITDA margin reached an all-time high of 22.3%, improving by 200bps on a QoQ basis, driven by continued gross margin expansion.

Stylam Industries has recently completed its laminates debottlenecking expansion in Q3 FY23-24 and is actively working on a brownfield expansion project costing between Rs. 200-225 crore. This expansion is anticipated to be finalized by Q3 FY24-25, doubling the company’s laminate revenue potential, according to HDFC Securities.

With a market cap of Rs. 2,638.81 crore, Stylam Industries has delivered impressive returns of nearly 40% over the last year. However, it has seen negative returns of around 10% in 2024. The brokerage firm projects significant growth in the US market for Stylam Industries, contributing to a 10-15% increase in revenue at a consolidated level. Gross and EBITDA margins are expected to remain stable, except for Q4 FY23-24.

Due to ongoing geopolitical events, low volume in the domestic market, and expansion delays, the brokerage firm has adjusted its volume estimates downward by about 5% each for FY24-26. In terms of financials, Stylam’s net profit increased by 29.16% to Rs. 31 crore in Q3 FY23-24 compared to Rs. 24 crore in Q3 FY22-23. However, it witnessed a 3.1% QoQ decline from Rs. 32 crore in Q2 FY23-24 to Rs. 31 crore in Q3 FY23-24.

As of December 2023, Foreign Institutional Investors (FIIs) hold 3.80% of the shares, while Domestic Institutional Investors (DIIs) hold 12.02%, totaling 15.82% of institutional holdings. Established in 1991 as Golden Laminated Ltd., Stylam Industries is a key player in manufacturing laminates, solid surface panels, and allied products, operating Asia’s largest single-location laminate production facility.

 

Metric Value Metric Value
Market Cap ₹ 2,653 Cr. Book Value ₹ 278
Current Price ₹ 1,566 Dividend Yield 0.16%
High / Low ₹ 1,980 / 942 ROCE 31.8%
Stock P/E 22.6 ROE 26.3%
Face Value ₹ 5.00 EPS ₹ 69.4
Sales growth 5Years 22.9% Sales growth 3Years 27.2%

 

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