Stylam- Decent Fundamentals with Cheap Valuation

Two positive updates from Stylam -
(1) Promoters have released pledged shares


(2) Amalgamation of subsidiary

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Decent results by Stylam.

  • Debt reduced by 75 crores
  • Debt to equity halved
  • Loss due to exceptional item. (write down of investment assets after selling it for less than book value)
  • Good operating cash flow

Disclosure: Invested.

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Total 4 resignations in 2021

2 independant directors and c.s resigned in 2021

On 6.9.21
=Mr. Karan Mehra has
tendered his resignation from the Post of Company Secretary and Compliance officer of the Company

Any view from seniors?

Disc…invested

even the CFO has resigned today…

i have exited this stock today at current levels…

everything seems good…

but,why own something where there is a flurry of resignations??..

there r plenty of fish in the sea…

Repeated CFO resignation has definate significance

But repeated C.S. resignation has any significance?

Company is export oriented so difficult(but not impossible) to manipulate financials.

Any views?

Dis …invested

The entire point is…
when there is a flurry of resignations…

why stick to the company??…

my theory is…when it comes to corporate governance…even if u have an iota of doubt…

u just exit… (i have learnt this from @Worldlywiseinvestors )

i exited all holdings today…

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You are perfactly right.

But i m just balancing my investment thesis and then take decision

1…Mukul agrawal is still invested upto sept 2021

2…M.F. holding increased by 4% in sept quarter

3…D/E ratio is continuously decreasing since last 8 yrs and since 2 yrs, significant decrease and they want nil debt by 2025

4…No single fraud surfaced till now in history of company on google search

5…Scruttlebutt

I have asked few dealers and all replied same
‚ÄúIt is export oriented big company‚ÄĚ

I have further asked one more dealer and reply is awaiting

…

FINANCIALS

1…Cfo>pat(Last 10 yrs)
Cfo=250cr
Pat=200

2…fcf%.sales/.capex
2021=15%/ 7cr
2020=9%/24cr
2019= (-) /45cr
2018= 2.3% /10cr
2017= (-) /77cr
2016= (-) /37cr

3…ROE@
5yrs avg@15.6
10yrs avg@16.2%

4…OPERSTING MARGIN

2021@20%
2019@17%
2017@16%
2015@11%
2010@7%

5…op profit(avg) growth rate
Last 5 yrs@29%
Last 10 yrs@34%

6…Sales growth rate
Last 5 yrs@16%
Ladt 10yrs@21%

7…D/E RATIO
2017@2.2
2021@0.5

8…receivables% of sales
2021=20%
2020=19%
2019=17%
2018=17%
2017=16%
2016=15%

9…debtor days
2021@76
2021@69
2019=63
2018=58
2017=55

…

FUTURE GROWTH

1…Corian/solid acrylic surface

=Our entry into acrylic
solid surfaces presents a huge opportunity, going forward.

=The Company acquired Golden Chem-Tech Limited

2…Hot coating process

=Last year, the Company entered a new business vertical
of value-added laminates and came up with anti-finger
and high-gloss finishing on laminates through hot coating
process.

=Our Company is the only manufacturer to provide
such value-added finish on thin laminates. Customers
are satisfied with the finish and the product seems to be
gaining momentum now

3…Short cycle press

=Our Company has entered into new a segment and added
short cycle press for lamination of impregnated paper on
Medium Density Fibre (MDF) panels

=However,
during the testing of the plant certain teething issues
cropped up which were dealt efficiently, hence making it
commercially viable

4…Capacity expansion

=The Company expanded its production capacity from 11.0
Mn sheets to 14.3 Mn sheets per annum in the second
half of Q4 of FY20. However, due to nationwide lockdown,
the commercial production of the expanded capacity
commenced from May of FY21

5…Sell of property

=By the year end, the Company disposed of its investment
property, the proceeds of which were used in repayment
of debts.

=The funds realised were used in the debt repayment
hence the resultant savings in the interest cost is
expected to improve the bottom line of the company.

6…Company with a view to explore
more potential markets, incorporated a Wholly owned
subsidiary (WOS) named Stylam Asia-Pacific Pte. Limited in
Singapore on the September 16th, 2019. Howbeit, subsidiary
being in its inceptive phase has not yet commenced its
business operations.

7…During the year under review, the company has purchased
34% shares of Alca Vstyle Sdn Bhd.(Alca) Incorporated
in Malaysia. These shares were purchased from existing
shareholders. Alca is engaged in the business of trading of
commercial and industrial furniture & fixtures.

8…We are gaining market share in India and overseas markets

9…Consolidation in industry with smaller players are difficult to stay in market

10…(2021)Foraying into attractive plywood segment
We are expanding horizontally into the INR 25,000
crore plywood market, which we believe is a natural
progression of our laminate business. The organised
section of the markets has started seeing benefits of the
GST and recent e-way bill implementation, demanding
improved prices especially in the premium segment.
A greenfield project with an investment of INR 60 crore
is being setup at Manak Tabra, Haryana. The business
is being setup as a separate entity under our whollyowned subsidiary Stylam Panels Limited. It will be run as
an independent unit, while simultaneously leveraging
on our expertise in the plywood segment and our robust
distribution network. We envision to create a mark for
ourselves in the premium plywood market launching
innovative value-added products, in addition to catering
to the industrial commercial segment and mass
consumption market.

Disc…invested

This is my latest portiilo with buy and hold approach

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there have been corp governance issues in the past…

i have read this article before…although i am not subscribed to moneylife anymore…

u can read if u have subscribed…

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Lighthouse Emerging India Investors,Limited has reduced the stake by 4.48% during the qtr which seems to be brought by Sixth Sense India opportunities. light house is shown as public share holder in screener…

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Some Scruttlebutt

I had talk with company’s marketing employee near my city.

As per him

1… company has recently started new dealership in various areas.He is also newly employed since 6 months.He has given names of new dealers of 4 districts under him

2…Company was in top 10 in domestic market but due to latest domestic focus,it is now at no 6.
Their focus is to be among top 3

3…Superior quality and among few company making anti finger print laminates

4…In some districts, dealers of century and greenlam have also made stylam available in enough stock

5…Company will start phenol production its own

I had also talk with one dealer who told that there was no marketing team for stylam in that perticular district but recently one week back marketing person has visited him for stylsm laminates

SO,I THINK THAT THEY HAVE STARTED DOMESTIC FOCUS BY LEVERAGING ON THEIR RECENTLY EXPANDED CAPACITY

Disc…invested and views may be biased and will stay invested

5 Likes

what’s makes the difference with the other plywood co’s, plz help me to identify the moat

MOAT

1‚ĶStrong brand recall in Europe ‚Äď one of the world‚Äôs most quality conscious markets

2…Economy of scale

…Large scale of operation
‚ČąLargest laminateproducing group in India with a production
capacity of over
14.3 million
laminates annually

3…Diversified products

=design excellence,
1,200+designs and
120+ texturesand finishes

=Multiple surfaces
available with high
gloss, metallic,
anti-bacterial, chalkboard,
fire and chemical
retardant, electrostatic,
magnetic, mirror and
translucent properties

=A wide range of
high-pressure
laminates, cubicle
boards and acrylic
solid surfaces

=We are capable of
designing laminates in a
range of sizes:

4…quality standards

5…implementation of advanced technology,

=We conduct
extensive research and development
to bring technologically advanced,
innovative products to delight our
discerning patrons in India and the
overseas markets.

6…Pan-India channel
partner network

=29+ years
of credibility in
the industry

7…Our unrelenting focus on value-added products enables us to sustain robust margins, despite increasing competitive intensity.

8…operating margin

=We exited the
year recording one of the best margins in a decade, which reflects
the growing share of value-added products in our overall sales

=On the other hand, changes in product mix supported by economies of scale and
operating efficiencies have helped us improve margins considerably.

= Our operating margin has
consistently averaged over 17% in a sector with high-competitive intensity,

…
GROWTH STRETAGY

A…Firstly, we will be
leveraging our expanded capacity which has a potential
of INR 1,200 crore p.a., strategically focusing on improving
our capacity utilisation to double our revenue by 2025.

B…Secondly, we will be concentrating on enhancing our
premium value-added product share to further improve
our margins.

C… Thirdly, we will be expanding our reach
and brand association, entering newer markets across
the globe and creating an expansive network across
India to cater to the growing demand.

D…Fourthly, having
created a mark for ourselves in the laminate segment,
we have decided to enter the plywood segment
anchoring on our strong industry presence in existing
business segments.

E… Fifthly, while we grow our topline,
we will judiciously remain focused on reducing our debt
to become debt-free, strengthening our margins and
balance sheet.

FUTURE GROWTH

2019/2020

1…Corian/solid acrylic surface

=Our entry into acrylic
solid surfaces presents a huge opportunity, going forward.

=The Company acquired Golden Chem-Tech Limited

2…Hot coating process

=Last year, the Company entered a new business vertical
of value-added laminates and came up with anti-finger
and high-gloss finishing on laminates through hot coating
process.

=Our Company is the only manufacturer to provide
such value-added finish on thin laminates. Customers
are satisfied with the finish and the product seems to be
gaining momentum now

3…Short cycle press

=Our Company has entered into new a segment and added
short cycle press for lamination of impregnated paper on
Medium Density Fibre (MDF) panels

=However,
during the testing of the plant certain teething issues
cropped up which were dealt efficiently, hence making it
commercially viable

4…Capacity expansion

=The Company expanded its production capacity from 11.0
Mn sheets to 14.3 Mn sheets per annum in the second
half of Q4 of FY20. However, due to nationwide lockdown,
the commercial production of the expanded capacity
commenced from May of FY21

5…Sell of property

=By the year end, the Company disposed of its investment
property, the proceeds of which were used in repayment
of debts.

=The funds realised were used in the debt repayment
hence the resultant savings in the interest cost is
expected to improve the bottom line of the company.

6…Company with a view to explore
more potential markets, incorporated a Wholly owned
subsidiary (WOS) named Stylam Asia-Pacific Pte. Limited in
Singapore on the September 16th, 2019. Howbeit, subsidiary
being in its inceptive phase has not yet commenced its
business operations.

7…During the year under review, the company has purchased
34% shares of Alca Vstyle Sdn Bhd.(Alca) Incorporated
in Malaysia. These shares were purchased from existing
shareholders. Alca is engaged in the business of trading of
commercial and industrial furniture & fixtures.

8…We are gaining market share in India and overseas markets

9…Consolidation in industry with smaller players are difficult to stay in market

10…(2021)Foraying into attractive plywood segment
We are expanding horizontally into the INR 25,000
crore plywood market, which we believe is a natural
progression of our laminate business. The organised
section of the markets has started seeing benefits of the
GST and recent e-way bill implementation, demanding
improved prices especially in the premium segment.
A greenfield project with an investment of INR 60 crore
is being setup at Manak Tabra, Haryana. The business
is being setup as a separate entity under our whollyowned subsidiary Stylam Panels Limited. It will be run as
an independent unit, while simultaneously leveraging
on our expertise in the plywood segment and our robust
distribution network. We envision to create a mark for
ourselves in the premium plywood market launching
innovative value-added products, in addition to catering
to the industrial commercial segment and mass
consumption market.

Disc …invested

5 Likes

Stylam Industries Q4 and FY22 concall:

  1. There is no slowdown in export market irrespective to steep rises in costs. Domestic looks equally demand-driven too. 15% volume growth but 5% growth in terms of value growth but the management wasn’t able to understand the question whether there was a fall in realization or not. But later they mentioned it was because of product. (Personally feel management wasn’t confident in answering this).

  2. There is no supply-side shortage in terms of sourcing RM. Price rise is staggered. Targeted run rate of 70-80 Crs per month is achievable. Demand for solid acrylic product is also picking up. Domestic Dealerships have been set up and growth is expected. They are looking to expand into Colombia, South America, only company attending an exhibition there.

  3. Price hikes history - hasn’t been much more 4-5% and the process is still on-going. They don’t have detailed data about this, segmented into products and geographies. Domestic v/s export margins is around 10-15% with export being higher. In export market, they sell 60-70% of there brand itself while other is through OEMs but they still mention that the product is of Stylam. Except EBITDA, everything is going well. Currently not running on full capacity.

  4. Revenue target for 2023 - hopeful to achieve 950 Crs. The start of this FY has been good for now. EBITDA will recover to 17-20%. (Management wasn’t himself giving guidance, the participant asking the question gave such range). The rise in RM prices and fall take time but management hasn’t experienced such a steep rise in last one year but they are happy with what results they have put out. 60-40 is the export and domestic mix but 5-10% domestic share will increase.

  5. Domestic revenues (240 Crs currently) should increase by 50-100% since there is a gap in the market. Previously they weren’t focusing so much on domestic market but from 1st April 2022 they are, so there is good traction visible. A big team has been set up with an experienced manager for Acrylic panel business with stocks being sent to factories, for both export and domestic. Lamination business has order backlog.

  6. Melamine is only 12-13% part of the whole laminates market. Backward integration is difficult and very capital intensive (1000 Crs). Plywood business has been temporarily put on hold and deferred till 2024 as there is a lot of competition in the space already. America export market looks really good for the whole business. Dividend policy will go on as usual.

  7. Competition in acrylic is not as much and will take one-two year for some entrant to set up but they want competition to come in so that the market grows and we can provide Make in India products. 6 RDC are set up for domestic market with a team of 60-70 employees. South India is the biggest market, they are already well-settled in North. Next quarter will be the best case to give guidance for FY23. Freight costs are slowly falling down. 20-25% is the expected growth rate for export laminates. With war coming to end, Russia and Ukraine’s demand will also come in.

  8. Competitors whose brand name is well-established but Stylam will take some time to build that name and then they’ll be able to become price maker rather than price taker. In some export markets they are the price makers due to brand visibility. Freight is currently operating like a cartel so it is difficult to predict the future prices. Domestic sales is around 150 sales employees. They have added Salesforce platform to track sales employee’s productivity (this request to measure was provided by one of the participants in the previous call and seems like they have taken it seriously). From the participant’s scuttlebutt, in Bangalore, Stylam’s visibility is increasing and revenue doubling from that city.

  9. No capex in plans for now and next few years as well. Current capacity utilization is around 50-65% for laminates.

  10. Melamine RM comes from Europe and Kraft paper is Domestic. Acrylic RM 80% is being imported. No possibility of taking price cuts, only hikes going ahead.

  11. Variable price hikes have been taken in export market, average around 4-5%.

  12. Market share from domestic market is being increased from both unorganized and organized players. Currently business focus is on Laminates and Acrylic.

  13. Acrylic capacity would be 35,000 sheets per month, 300-400 crores in value terms. Acrylic would be an import-substitute product. Dealers for laminates are in range of 70-80 and are increasing day-by-day with focus on quality and quantity. Major states is Punjab & Karnataka.

  14. Melamine RM cost accounts for around 10-11% and is now decreasing. Coal, kraft paper, phenol all of these have contributed to drop in EBITDA margins.

  15. Earlier when Stylam wasn’t know, they were ready to supply it to any customer but now since their brand name is getting popular they are choosy about their customer list. The focus is on building brand name. They are now exporting to 70 countries (it was 60 countries in previous years). They have also implemented SAP software for bookkeeping and accounting.

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