Greenlam Industries is entering a critical inflection phase after a seasonally weak third quarter, with management signaling a sharp rebound in volumes, operating leverage, and profitability from Q4FY26 onward. While near-term margins were weighed down by losses in newer verticals and one-off charges, the core laminates business continues to demonstrate pricing power and export resilience. With capacity expansions progressing as planned and plywood and particleboard segments approaching breakeven, ICICI Direct expects earnings growth to accelerate sharply over the next three years. The brokerage maintains a BUY call with a 12-month target price of Rs 310, implying meaningful upside from current levels, backed by a projected earnings CAGR of over 55 percent through FY28.

Greenlam’s global manufacturing footprint underpins long-term scalability

Greenlam Industries operates one of the most diversified surface-solutions platforms in the Indian building-materials space, with a product portfolio spanning laminates, particleboard, plywood, decorative veneers, engineered wood flooring, and doors. The company exports to more than 120 countries and commands a leadership position in laminates, holding approximately 17.8 percent share of the organised domestic laminate market and over 29 percent share in laminate exports.

This global orientation has enabled Greenlam to balance domestic cyclicality with export opportunities, a structural advantage that becomes increasingly relevant amid uneven construction demand across geographies.

Q3FY26 reflects temporary pressure, not structural weakness

The December quarter numbers masked underlying operational progress. Consolidated revenue rose 17.3 percent year-on-year to Rs 706.4 crore, driven by improved realizations rather than volumes. Laminates and allied products contributed Rs 562.1 crore, up 8.2 percent YoY, even as volumes dipped marginally due to holiday disruptions and deferred exports.

EBITDA for the quarter stood at Rs 68.2 crore, with margins compressing to 9.7 percent, primarily due to elevated losses in the plywood segment. Adjusted profit before tax came in at Rs 11.7 crore, excluding a one-off Rs 6.2 crore labour code charge and higher tax expenses.

Laminates segment shows pricing strength and margin expansion

Despite muted volumes, the laminates business delivered a notable margin rebound. EBITDA margins expanded by approximately 220 basis points year-on-year to 15.4 percent, aided by currency tailwinds, export mix improvement, and disciplined pricing.

Capacity utilization in laminates remained healthy at around 83 percent, while realizations climbed 8.9 percent YoY to roughly Rs 1,143 per sheet. Management expects deferred export shipments from Q3 to convert into revenue in Q4, setting the stage for a volume-led recovery.

Newer segments remain loss-making but breakeven is now visible

The plywood and particleboard businesses continue to dilute near-term profitability, but operational metrics are improving. Particleboard revenue grew sequentially to Rs 54.2 crore, supported by higher utilization and improved product mix, although the segment still reported an EBITDA loss.

Plywood revenue increased 9.5 percent YoY to Rs 90 crore, but low utilization of around 37 percent kept margins under pressure. Management has guided for EBITDA breakeven in both segments by FY27, contingent on utilization scaling to the 55–60 percent range.

Capacity expansion at Naidupeta anchors medium-term growth

Greenlam’s brownfield expansion strategy remains firmly on track. Two additional laminate lines at the Naidupeta facility are expected to be commissioned by Q4FY27, materially expanding capacity without the execution risks of greenfield projects.

Management has modestly revised FY26 revenue growth guidance to 17–19 percent, citing Q3 seasonality, while reiterating confidence in a strong Q4 performance. ICICI Direct estimates overall revenues to grow at a 16.7 percent CAGR between FY25 and FY28, reaching Rs 4,079 crore.

Margins and earnings set for sharp acceleration post FY26

Operating leverage is expected to emerge decisively over the next two years. EBITDA margins are projected to expand from 10.7 percent in FY25 to 14.1 percent by FY28, driven by higher laminates contribution and loss reduction in new businesses.

Earnings are forecast to compound at approximately 55 percent CAGR over FY25–FY28, supported by volume recovery, better capacity utilization, and normalization of tax and exceptional costs.

Financial trajectory highlights improving return ratios

Return metrics are expected to transition meaningfully from single-digit levels. ICICI Direct projects RoCE to rise to 15.3 percent and RoNW to 17 percent by FY28, reflecting improving capital efficiency and margin normalization.

Debt levels remain manageable, with net debt at around Rs 1,010 crore, and working capital improved to 58 days, down nine days year-on-year, signaling better cash discipline.

Valuation anchored on FY28 earnings visibility

The target price of Rs 310 is derived using a 30x multiple on FY28 earnings, which ICICI Direct believes is justified given the sharp inflection in profitability and improving return profile.

At current levels near Rs 246, the stock trades at elevated near-term multiples but appears more reasonably valued on forward earnings as profits scale.

Key risks investors should monitor closely

Execution risk in newer segments remains the primary concern, particularly if plywood and particleboard utilization ramps up slower than anticipated. Additionally, laminate exports remain exposed to geopolitical volatility, currency movements, and global housing demand.

Investment view and target levels

ICICI Direct maintains a BUY rating on Greenlam Industries, citing visible earnings recovery, margin expansion, and improving capital returns.

Current Market Price: Rs 246

Target Price (12 months): Rs 310

Upside Potential: ~26 percent

Valuation Basis: 30x FY28 P/E