Buy Stylam Industries; target of Rs 2582: Anand Rathi

Anand Rathi's research report on Stylam Industries

Aided by higher offtake overall (up 8.2% y/y to 3.04m sheets) and better blended realisations (up 9.6% y/y to Rs822/sheet), Stylam’s Q3 revenue stepped up 18.6% y/y to Rs2.5bn. Despite the gross margin contracting, strong revenue growth pulled up gross profit 9.3% y/y to Rs1.2bn. EBITDA came 3.8% lower y/y to Rs460m on higher other operating expenses (up 25.7% y/y). PAT was 4.8% lower y/y to Rs298m. After the significant fall in the stock price (12% in a week, 19% in a month and 23% over three months), we believe the risk-reward is favorable. Hence, we upgrade the stock to a Buy.

Outlook

We expect 19%/20% revenue/earnings CAGRs over FY24-27. At the CMP, the stock trades at 22x/18.1x/15.3x P/E of FY25e/26e/27e. After the significant fall in the stock price in the past three months, we believe the risk-reward is favorable. Hence, we upgrade the stock to a Buy rating, with a 12-mth TP of Rs2,582, on 22.5x FY27e earnings (earlier Rs2521, 22.5x FY27e).