Whenever you ask someone to get you a photocopy of something, chances are that they say. “Just Xerox it”, but what most people may not know that Xerox was the company to bring in the photocopying machine, making it as popular it has been since the 50’s!
In the same manner, when you get your house decorated, you may have heard the carpenters or contractors suggest that you put new “Sunmica”. While they mean that you need to apply new decorative laminates on your furniture, the brand that was launched in the 60’s as a joint venture between Bombay Burmah Trading Corporation and Formica International, became synonymous with the product.
Laminates are just sheets that cover furniture, counter-tops, and wardrobes - an economical home decor item with protective and decorative capabilities, making it an Indian household classic that mimics the grandeur that comes from wood and marble, but for a fraction of the cost.
It is no wonder that the market itself has grown into a Rs. 10,000 crore one now, from about Rs. 3,500 crore in 2017 (19% CAGR over 6 years)!
Yet among the myriad of players in this see of resins and design arises a small player with about a 9% market share but showcasing growth that beats the big guys - Stylam Industries.
However, the little-heard-of Stylam has been growing at a 20% CAGR over the last decade, which is faster than all of its better-known peers, which are growing at 13-15%. What’s making Stylam outperform the industry, and will it continue doing so in the future?
1. Product Differentiation
The key purpose of laminates is cosmetic value (look and feel). Stylam, over years, has expanded itself into several products, and now has a broad range of offerings other than the traditional wood, acrylic or metal finished laminates.
These include mirrored laminates, magnetic laminates, metallic laminates, laminates that are shielded from static charge, laminates with embossed surfaces, chalk/marker board laminates, laminates that can be curved, and printed laminates.
Stylam has been working on creating brand awareness with its wide range of products, which comprises of over 1,500 designs and 150 textures and finishes.
But laminates are not only about the feel-good factor. What also makes for a better product is a focus on durability and longevity. Anyone who does a good job at these would naturally win.
Laminate sheets are typically made of four layers.
These four layers are pressed together at high temperatures, which integrates them and makes them ready for installation.
The base layer is made of melamine plastic, which gives the sheet its shape and stability
The middle layer is made of high-density fibre board, which makes the sheet moisture resistant
The third layer is decorative and has prints of wood or stone
The top layer is a transparent surface that is waterproof, and also protects against stains and scratches.
Stylam has consistently rolled out innovative and better quality products over time, using state-of-the-art processes like hot coating technology from Kleiberit and Barberan in Germany and Spain, and the PU+ Lacquer coating process; giving it an edge over competition.
2. Expanding Market Presence
Testimony to the superior quality of Stylam’s products is the fact that two-thirds of its revenue comes from exports, with a presence in more than 80 countries.
It has managed to gain its standing as a credible international player thanks to certifications from multiple global agencies and recognition by international trade organisations.
Additionally, the global preference of China+1 adoption has aided a natural pull for Stylam, given its quality assurance.
However, now it has been increasingly focusing on the Indian market by:
Expanding reach: Tie-ups with distributors and dealers, appointment of C&F agents in several domestic markets, adding regional distribution centres, gaining a stronger foothold in the North and West where its presence is weaker
Creating brand awareness: To become more popular in the brand-conscious Indian market, Stylam has also started spending heavily on advertising through brand campaigns (Kuch Nahi Dikhega), and IPL sponsorships (Kings XI Punjab)
3. Foray Into Acrylics and Plywood
While Stylam started off as a laminates player, it has broadened its playground by entering new categories. In 2018, it ventured into solid acrylic surfaces, which are durable and affordable alternatives to natural stone surfaces like granite and quartz.
Acrylic surfaces give a finish similar to natural stone, but for a fraction of the cost, making them preferred on the same lines as laminates surfaces are over wood or metal. Additionally, acrylic surfaces can also be bent into shapes using a process called thermoforming; giving it an edge over natural stone.
They are hence increasingly being used in kitchens and bathrooms for integrating sinks, as countertops, and for cladding walls. However, the market has been entirely dependent on imports so far.
Stylam has set up capacity for the production of 3 lakh acrylic panels. However, it is operating at a capacity utilisation of just 5% at the moment, and with revenue of ~Rs. 20 crore in FY23, the segment contributes to just 2% of total revenue.
With business picking up, the company expects revenue from the segment to more than double in FY24 to Rs. 50 crore. At peak capacity, the segment has potential of delivering revenue of Rs. 400-500 crore per year, which could make for nearly half of the current total revenue.
Additionally, Stylam is also planning on tapping into the plywood business, which makes up for 65% of the entire furniture market in India. An entry into the market would increase Stylam’s addressable market by 2x, adding to the opportunities that it’s already milking. However, the entry into ply is still not firm, with the management expecting to take a decision only post 2024.
These businesses aren’t just related for Stylam from a product and production standpoint, but also from the distribution standpoint. It can leverage its existing laminates distribution to get a fast entry into these segments, increasing the potential for success.
Outperformance Might Just Continue
While Stylam’s historic outperformance can be justified through its product superiority, potential for that to continue is cemented by its plans on increasing product reach in the domestic market, and its foray into new, promising and complementary segments.
It has some additional advantages, which can further its performance compared to peers:
Increasing share of higher value add products are likely to continue pushing realisations and growth higher
Higher focus on the faster-growing domestic market, on a relatively small base for Stylam is likely to result in sustained outperformance
Aggressive capacity expansion in laminates and acrylic surfaces in the past has led to full capacity still not being utilised. As utilisation moves higher, profitability too will gain
Despite higher growth, Stylam seems to be trading at valuations which are cheaper compared to larger peers. Stylam does have the potential to make a mark in the market that was once just confined to Sunmica, and backing the underdog (or at least giving it a look) has been an age-old method to find undervalued plays in growing markets like this one!
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