Stylam Industries Gets 'Buy' Rating from Investec, 41% Upside Predicted

Stylam Industries shares surged nearly 9% in trading after international brokerage Investec initiated coverage, projecting a 41% upside. At 12:25 PM, shares of the construction company were trading at ₹1,818.8 on the NSE, up 8.1% from the previous close. 

Stylam Industries share price have increased by around 15% over the past year, compared to a 25% rise in the frontline Nifty 50 index. 

Investec observed that while wood panel peers have expanded into traditional categories to widen their Total Addressable Market (TAM), Stylam Industries is venturing into acrylic, an allied category. Stylam Industries has invested ₹50 crore and has projected potential revenue of ₹400-500 crore by FY27.

The brokerage issued a 'Buy' call on Stylam Industries, with a target price of ₹2,362. "Rapid revenue growth, both exports and locally in the laminates space, over FY19- 24 reflects Stylam’s nimble execution on designs, SKU management and its distribution strategy," said the brokerage.

"A different approach on marketing/distribution vs. the market leader drove strong earnings growth (30 per cent CAGR FY04-24). Incremental expansion offers attractive RoCE profile in lam, acrylic (and widens TAM). Potential investment by an MNC could enhance Stylam’s tech capability, distribution, brand placement and aid earnings trajectory/multiples. We forecast 11 per cent EPS CAGR over FY24-26E," Investec said. 

Stylam Industries achieved the fastest revenue growth in its export and domestic businesses, with a 15% and 14% CAGR, respectively, over FY19-24. According to Investec, this growth reflects Stylam's diverse product offerings, innovative designs, and effective distribution strategy. Although Stylam's per unit revenue has lagged behind its peers, it excels in operating metrics due to strict cost controls, particularly in advertising and promotion (A&P) and employee costs. 

Stylam Industries achieved a PAT CAGR of 30% over FY04-24, funding growth capital expenditures through internal accruals and deleveraging over time. During this period, promoters increased their stake in the company from 43% in FY04 to 54.6% in FY24.

"The firm’s incremental capex via de-bottlenecking/brownfield expansions bodes well for incremental RoCE. With regard to its foray into acrylic, even at conservative margins, we expect healthy return ratios and see upside risk to our estimates on right execution with further upside if tariffs stand imposed," added the brokerage. According to Investec, the company could record 19% EBITDA CAGR over FY24-26E. 

Stylam Industries Ltd is an India-based company engaged in the manufacturing of laminates, solid surface panels, and allied products. The company’s product portfolio includes high-pressure laminates, performance laminates (HPL), specialty laminates, exclusive surfaces, acrylic solid surfaces, and compact laminates.