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HDFC Securities Institutional Equities
We expect Greenlam Industries Ltd. to outperform laminates industry growth and deliver strong margin in this segment. We expect a 12% revenue CAGR in the laminate segment during FY24-27E.
Owing to entry into the new ply and particle board segments, we expect a strong 18% revenue CAGR during FY24-27E at the company level. We estimate 21/22% Ebitda/adjusted profit after tax CAGRs for the same period.
We like Greenlam for its leadership positioning in laminates. However, we are cautious of plant ramp-up in the new ply and particle board segments (large capacities added in a short period).
Owing to supply pressure and elevated timber price, we expect particle board segment margin to remain under pressure in the medium term. We maintain our FY25/26/27E estimates for all business (ex-particle board).
We have factored in slower ramp-up of particle board business, leading to a cut of 1/5/5% in APAT estimates for FY25/26/27E respectively. We expect particle board business to incur a PAT loss until FY27E. So, we have moved to SOTP-based valuation methodology from consolidated EPS based earlier.
We now value Greenlam (exparticle business) at the same 33x its Sep-26E.
We have valued the upcoming particle board business at 0.5x P/B Sep-26E, leading to SOTP based revised target price of Rs 640/share. We maintain our Add rating on the company.
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