Greenlam Industries Ltd

A major and dominant brand in the home building material space, with a strong presence in product segments like laminates and veneer, Greenlam Industries Ltd. (GIL) products have many uses in our daily lives . GIL, now gearing up to enter the plywood and particle board space, has the potential to do a profit of Rs. 250 crores and the company’s cash flow can grow at a CAGR (Compounded Annual Growth Rate) of 27% till FY27.

Confident Management

The management is confident of growing quickly and securely. The management expects to speed up the growth achieved in the last few decades in just the next few years. GIL achieved very good results in the last seven years from its existing business. Management believes that the time has come to extrapolate this capability across additional revenue engines. Today’s GIL is engaged in the manufacturing of laminates and veneers, which addresses a cumulative market of Rs. 11,000 crores, but with the entry in the plywood and particle board, GIL is expected to address a market size of nearly Rs. 46,000 crores.

All set for Greenlam 2.0!

Post the capital expenditure planned into production, we believe that the Greenlam brand will become larger, more profitable, and will have more sustainability across market cycles. Closer access to ports along with integrated manufacturing plants (laminate + compact laminates) will help them manage the supply chain more efficiently. Moreover, the entry of multinational companies like IKEA in the Indian furniture market will increase the thrust of particle board made furniture. This is because 90% of IKEAs home furniture products are made of particle board.

Triggers Ahead…

Dani family, promoters of Asian Paints, buys a 4.9% stake in Greenlam at Rs. 309 per share through preferential allotment which increases their stake to just shy of 10%. This is a very important point as they know all the things needed for creating a very successful and a big brand. GIL is one of the best proxies to play the real-estate cycle. New capex (capital expenditure) plan will lead to good growth in revenues.

Opportunities Galore

India’s plywood sector is at an inflection point. Thanks to the high demand of particle board products, this industry is on a positive trajectory. There is a trend towards formalisation. The market share of unorganised players is declining and that of organised branded players is rising. Price sensitivity is declining and consumers are willing to pay more for superior quality. In line with global benchmarks there is an attractive headroom in enhancing product quality standards. More consumers seek to buy all their surface and substrate products from a single brand and retail outlet.

Taking all of the above to consideration, we recommend a “Buy” on GIL with a price target of Rs.435.

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