Antique | Greenlam 2QFY24 result update – 231101

Antique | Greenlam 2QFY24 result update – 231101

Visible recovery in demand and margins; steady growth outlook

Greenlam Industries (Greenlam) reported strong operating performance driven by recovery in volume growth and margins for the laminates segment. Results were above our estimates, however, margins were in line due to a drag from the veneer and plywood segments. Key highlights: 1) Domestic/ export laminate volume grew 21%/ 10% YoY. Guidance of 40%–50% CU at its new laminates and plywood plants by 4QFY24. 2) Stable RM prices lead to laminates EBITDA margin improving to 16.4%. Overall margin remained stable at 12.5%. 3) Investing an additional INR 600 mn at the new plants to provide for value-added capacity expansion. Targeting full CU of the expanded laminate capacity (24.5 mn sheets) by FY25. Capex spend for the upcoming particle board plant has been increased to INR 7.8 bn from INR 6 bn. Expect the facility to stabilize over three years post commercialization (4QFY24). 4) Guidance of 20% revenue growth and 13%–14% EBITDA margin in FY24. 5) Project/ net debt of INR 5.5 bn/ INR 6.7 bn as of 2QFY24. Expect peak net debt of INR 10.9 bn in FY24 (guidance of INR 8.5 bn). We maintain our FY24 EPS estimates and cut our FY25 EPS estimates by 19% on account of the impact of increased depreciation and interest costs. We believe the successful ramp-up of new capacities can triple FY23 EPS by FY27. Maintain BUY with a revised TP of INR 560 (earlier INR 540) based on 32x 1HFY26 EPS (earlier FY25E; five-year avg./ high/ low of 25x/ 36x/ 14x).

Investment Summary

We believe Greenlam can deliver laminates/ overall revenue CAGR 9%/ 21% over FY23–26E driven by: 1) Export market demand recovery and steady demand in the domestic market, 2) Successful ramp-up of capex in laminates, plywood, and particle board segments. Retain BUY with TP of INR 560.