Greenlam Industries shares rally 21% in 5 days! Stock price targets hint at further upside

Shares of Greenlam Industries, a manufacturer of decorative laminates, climbed 3 per cent in Wednesday's trade, taking their 5-day rise to 21 per cent. A host of brokerages came out with price targets that suggested up to 14 per cent upside on the stock as they see strong capex in the past to lift volumes and revenues from June quarter onwards.

On Wednesday, the stock rose 3.05 per cent to hit a high of Rs 372.60 on BSE. Greenlam ‘s history can be traced to the de-merger of Greenply Industries' laminates, decorative veneers and compact laminates businesses in 2014 and subsequent listing of its equity shares on the stock exchanges in 2015. The stock recently got split from a face value of Rs 5 to shares with face value of Re 1.

HDFC Institutional Equities said Greenlam has expanded the Pratij laminates capacity by 2 million sheets in May and will start a greenfield 3.5 million sheets plant in AP in the second quarter. These should drive 17 per cent laminates volume CAGR during FY23-25E, the brokerage said while suggesting a target of Rs 395 on the stock.

"Its plywood plant in Chennai will be operational in June and the greenfield particleboard one in Q1FY25E. We expect a gradual ramp-up of these to further boost consolidated financials. We raise our FY24/25E Ebitda

estimates by 5 per cent/11 per cent, factoring in better laminates margin outlook. However, high capex should keep its net debt to EBITDA elevated at 2-3 times, in our view," HDFC Institutional Equities said.

Greenlam's management has guided for a top line growth of 20-25 per cent YoY for FY24 while has not given a guidance on Ebitda margin, as two new projects are getting commissioned. The company expects can achieve peak sales of Rs 3,500-3,600 crore and the management aspire to reach peak sales by FY26E.

Nuvama Institutional Equities said the Greenlam management continues to conservatively guide for at least 10–12 per cent volume growth and 25 per cent-plus revenue growth for FY24. Nuvama believes a strong upcoming capex in FY23 can drive earnings growth for the company. Rolling over to FY25E EPS and continuing with the 20 times PE yields an increased target price of Rs 425, Nuvama said.

JM Financial said Greenlam’s March quarter print was above Street expectations on almost all fronts, with revenue rising 15 per cent YoY, Ebitda 49 per cent and profit by 62 per cent.

Laminates volume grew 17 per cent against JM Financial's expectations of 11 per cent while realisation declined 1 per cent YoY on product mix, in line with JM's estimate.

"We raise our FY24-25 EPS estimates by 3-4 per cent to reflect 4QFY23 performance and maintain HOLD with a March 2024 target  of Rs 340 (25x FY25EPS) on account of limited upside. Delayed commissioning of laminate/PB expansions is a key risk to our call," it said.

SMIFS has a target of Rs 413 on the stock.

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