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ICICI Securities
Greenlam Industries (Buy)
CMP: ₹801.15
Target: ₹1,070
Greenlam Industries is a laminates manufacturing company. The company is engaged in the business of manufacturing laminates, decorative veneers and allied products through its factories at various locations and branches and dealers' network spread all over the country.
Its segments include laminate & allied products, and veneer & allied products. The laminate & allied products segment is engaged in the business of manufacturing of laminates, compact laminates and other allied products through its wholesale and retail network.
After the Q1 disappointment largely due to SAP implementation, we expect Greenlam Industries to be back on track in FY20E, with volume revival likely to be backended in H2FY20E. Volume growth is expected in both domestic market (driven by expected catalogue launch in October 2019) and export market (aided by recent commissioning of large-sized laminate capacity to cater largely to European market). While traction in the niche segments — EWF and ED — is likely to continue, their profitability may remain impacted in the near term.
While we maintain our revenue and EBITDA estimates, the saving arising from tax cuts announced by the government last week is likely to drive earnings higher by 12 per cent/10 per cent for FY20E/FY21E respectively. Maintain BUY with a revised target price of ₹1,070 (vs ₹973 earlier) valuing the stock at 22.5x FY21E earnings.
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