Stylam Industries (SYIL), one of India's top four laminate manufacturers, has given its investors multibagger returns. The company commands approximately 8% of the overall market share. It stands as the second-largest laminate exporter in India, with exports accounting for about two-thirds of its total revenues.
Since March 2023, the company's shares have appreciated by 110%. With recent capacity expansions and favorable industry dynamics in mind, domestic brokerage firm Equirus Securities foresees continued momentum in the stock price rally.
The brokerage said that the company has steadily fortified its position on the global stage over the years. It says the company has emerged as a key player in India's laminate industry, contributing 19% to the country's overall laminate exports.
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From FY17 to FY24, India's laminate exports saw robust growth, achieving a 14% CAGR and reaching ₹32 billion by FY24. Despite a rise in market participants, the brokerage notes that the company has managed to increase its market share from 16% to 19% during this period, driven by a commendable 17% CAGR in export revenues, outpacing other organised players in the sector.
The brokerage emphasises the company's significant international growth, expanding its presence from 60 countries in FY18 to over 80 countries by FY24. Key markets in Europe, the Middle East, the Far East, and North America collectively contributed 90% to the company's export revenues in FY23.
This geographical diversification not only boosted revenue but also insulated SYIL against fluctuations in freight costs, as the company predominantly operates on a CIF basis, passing on additional expenses to customers.
In FY23, SYIL embarked on an ambitious strategy to explore new markets and expand its business horizons, participating in international exhibitions across Dubai, Germany, Atlanta, and Bogota. This proactive approach underscored SYIL's commitment to global expansion and market diversification.
To meet burgeoning export demands, SYIL greenlit the establishment of a new laminate plant adjacent to its existing facility in Manak Tabara, Haryana. According to the brokerage estimates, this plant could potentially double SYIL's revenues, contributing around ₹8 billion at peak utilisation within the next 4–5 years.
The new plant will focus on manufacturing value-added products (VAP), targeting high-growth export markets, and expanding its customer base among new Original Equipment Manufacturer (OEM) clients.
While the domestic laminates industry remains fragmented with numerous unorganised players, industry experts foresee consolidation in the long term. The top five players are expected to consolidate their market share significantly, alleviating pricing pressures and creating a conducive environment for organised players like SYIL to thrive, the brokerage added.
Equirus believes that the domestic market (one-third of SYIL’s total revenues) will continue to see healthy near-term growth on the back of strong momentum in real estate sales and a sustained pickup in consumption of late-stage building materials over the next 2–3 years.
However, due to the commissioning of the new brownfield laminate plant by 3QFY25 targeted towards exports, the brokerage expects a marginal reduction in SYIL’s domestic share from FY26E onwards.
In light of these growth factors, the brokerage has initiated coverage on the stock with a ' buy' rating and set a target price of ₹2,489 apiece, which indicates an upside of 21% from the stock's previous closing price of ₹2,061.
In conclusion, with a solid foundation in international markets, strategic expansions in production capacity, and a proactive market strategy, the company is well-positioned to capitalise on emerging opportunities and consolidate its leadership in the global laminates industry.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
