The brokerage has revised the PE multiple up from 14 times to 18 times (still around 25 per cent discount to five-years’ average).
Edelweiss has given a hold rating to Greenlam Industries with a target price of Rs 745. The share price moved down by -1.08 per cent from its previous close of Rs 767.30. The stock’s last traded price is Rs 759.
Greenlam Industries’ Q4FY20 numbers came broadly in line with brokerage estimates. Subdued domestic volumes (down 26 per cent year on year) were partially offset by a 12 per cent year on year spurt in exports volume, higher other income and lower tax, leading to in-line PAT.
Investment Rationale
According to the brokerage, though growth in the domestic market is still muted and is currently at 40-50 per cent pre-Covid-19 level, the management is confident of growth in exports market (currently at 60- 70 per cent pre-Covid-19 level) to sustain with better margins.
Further, it envisages the laminates category to benefit significantly from market consolidation, leading to increase in market share. Given the 50 per cent plus share of exports in total revenue, the brokerage believes Greenlam is well placed to take advantage of the burgeoning exports opportunity.
Hence, the brokerage has revised the PE multiple up from 14 times to 18 times (still around 25 per cent discount to five-years’ average). However, given the recent run-up in stock, the brokerage maintains a hold rating with a revised target price of Rs 745 (Rs 578 earlier) based on March 2022E EPS and awaits for any correction opportunity to upgrade the recommendation.
Source: Edelweiss
Financials
For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 324.02 crore, down -9.50 per cent from last quarter sales of Rs 358.03 crore and down -10.05 per cent from last year's same quarter sales of Rs 360.22 crore. The company reported net profit after tax of Rs 21.71 crore in the latest quarter.
Promoter/FII Holdings
Promoters held 54.89 per cent stake in the company as of March 31, 2020, while FIIs held 2.56 per cent, DIIs 15.59 per cent and public and others 26.96 per cent.
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