YES Securities is bullish on Greenlam Industries has recommended buy rating on the stock with a target price of Rs 1031 in its research report dated July 30, 2020.
YES Securities' research report on Greenlam Industries
With lockdown measures in April 2020 and tier 1 cities (major end users) being COVID hotspots during the quarter, domestic business of GRLM was a near washout (operated at 30% of pre-COVID levels). However, overseas business saved the day (operated at 85% of pre-COVID levels). Accordingly, total net sales came in at Rs 1,604 mn, declining by 44.6% y/y. Although GRLM managed to reduce operating costs by 37% y/y, the very nature of laminate industry remains fixed cost intensive which pressurized the operating margins. EBITDA margins declined by 539 bps y/y to 4.9%. Absolute EBITDA stood at Rs 79 mn, a sharp fall of 73.6% y/y. Management has guided that July 2020 business has reached to 80% levels as compared to July 2019 with domestic business at 60% and near normalization in operations of international business.
Outlook
Accordingly, our financial projections for FY21E/FY22E remain intact with no revisions. We maintain our BUY rating with target price of Rs 1,031/share – DCF derived value with implied P/E multiple of 24.7x on FY22E.
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