The Changing Landscape of the Laminates Industry

Published by Sharekhan Education | October 16, 2023

Amit Pathak | Sharekhan Education 

In this blog article, we shall understand the Changing Landscape of the Laminates Industry.

Introduction:

Laminates have emerged as a robust material in both residential and industrial settings, finding application in cabinets, countertops, furniture, and wall panels. Over the years, they’ve gained popularity due to their durability, improved performance, low maintenance, and user-friendliness. The essential components in laminate production include Kraft and decorative paper, phenol, and melamine. The paper attributes approximately 60-65% of the total cost, while chemicals constitute 30-35%.

About the Industry:

India’s furniture manufacturing and consumption levels are relatively low, with per capita furniture usage falling below the global average. Significant fragmentation marks the industry, with organized furniture manufacturers holding a mere 20% market share. This implies that the unorganized sector, accounting for 80% of the market, may diminish in the coming years. A recent analysis by PwC forecasts a fourfold growth in the Indian furniture market from 2019 to 2035, promising a bright future for domestic producers of laminates, plywood, MDF, and particle boards in India.

The demand for laminates is on the rise, driven by increasing requirements for commercial spaces in both developed and emerging economies. Industry estimates suggest that the Indian laminates market currently values at INR 12 billion (including INR 3 billion in exports) and projects to grow by around 10% in the next five years. Factors fueling this growth include urbanization, a shift towards contemporary home furnishings, and the adoption of higher living standards. Thanks to competitive labor costs and a “China-plus-one” strategy, Indian laminates may see an upsurge in export activities in the coming years. Furthermore, the potential inclusion of the laminates sector in the Indian government’s Production-Linked Incentive (PLI) scheme could bolster this growth.

About Stylam Industries:

Let’s turn our attention to Stylam Industries in this context. This company specializes in the production of laminates under the brand name “STYLAM”.  It derives approximately 70% of its revenue from exports to European and Southeast Asian nations. Notably, it serves as an associate sponsor for the IPL team, Kings XI Punjab. Stylam boasts an annual installed capacity of 16 million laminate sheets. It is committed to overcoming production bottlenecks and expanding its operations to support its growth strategy. According to a recent report from HDFC Securities, Stylam is anticipated to achieve a Compound Annual Growth Rate (CAGR) of 15% in revenue, 23% in EBITDA, and 26% in PAT from fiscal year 2023 to fiscal year 2026. Return on Equity (RoE) is expected to remain at approximately 26-27%. With robust operating cash flows, Stylam is well-positioned to finance its capital expenditure and maintain a healthy net cash balance.

Source – Brokerage Report

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