Greenlam Industries (Q1 FY21) - BUY (Target Rs1,031, Upside 39%)
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. 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.
Shares of Greenlam Industries Ltd was last trading in BSE at Rs.740 as compared to the previous close of Rs. 741.15. The total number of shares traded during the day was 1427 in over 383 trades.
The stock hit an intraday high of Rs. 769 and intraday low of 705.45. The net turnover during the day was Rs. 1060551.