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Result Synopsis

Greenply Industries Ltd (MTLM), registered a stellar performance In Q1FY25 wherein plywood volumes increased by 9%YoY (2-year CAGR stood at 5%) & revenue grew by 10%YoY (2-year CAGR came in at 7%). Margins were lower by ~80bps YoY & ~70bps QoQ due to higher timber cost. Though company took a price hike of 1.5-2%, the impact of same will be materialized from Q2FY25E. Incrementally, MDF segment volumes stood at 42,724cbm which was a decline of 7%QoQ, but better product-mix enabled the company to expand realization by 8% over similar period. Notably, margins of MDFs improved sequentially (Vs industry peers reporting a steep decline) to 16.7% despite the 2% rise in timber cost on account of high contribution of valueadded products which stood at 17% Vs 11% in previous quarter. Expansion in margins for MDFs is extremely positive as industry prices are expected to inch-up from hereon and product-mix for MTLM is also likely to improve, which will enable company to surpass their annual guidance of 16%. Total debt declined to Rs4.46Bn Vs Rs5.24Bn as on March’24 owing to higher cash profits in MDF, improving working capital cycle and utilization of GST credits. For FY25E, management aims to maintain debt at Rs4.5Bn.

Management maintained their annual guidance of 8-10% volume growth and 8-9% EBITDA margins for Plywood segment & 50% volume growth and 16%+ EBITDA margins for MDFs.

We remain positive on company’s growth and Q1FY25E’s robust performance provides further confidence. We expect plywood volume/value growth of 9%/8% CAGR respectively over FY24-FY26E with EBITDA margins of 9/10% respectively for FY25E/FY26E. We have factored margin improvement in FY26E, accounting for reduction in timber cost and higher volume trajectory. For MDFs, we reckon a volume/value CAGR of 34%/36% over FY24-FY26E with EBITDA/cbm of Rs5,100/Rs5,400 for FY25E/FY26E respectively. Overall, we have revised our FY26E EPS upwards by 8% to Rs14.8. Owing to strong growth with overall woodpanel demand likely to improve from hereon, focus on value-added products for MDFs, industry prices near bottom for MDFs & balance sheet deleveraging (current Rs4.5Bn will be peak), we have revalued the stock at P/E(x) of 30x on FY26E EPS, arriving at a target price of Rs445 (previous Rs343). We retain GREENPLY INDUSTRIES as our toppick form the segment.

Result Highlights

* Revenue stood at Rs5.84Bn, a growth of 36%YoY. Plywood revenue (incl misc. revenue) grew by 10%YoY. MDF segment topline stood at Rs1.32Bn.

* Operating margins came in at 9.9% (marginally above our est of 9.5%) as compared to 6.3%/9.6% in Q1FY24/Q4FY24 respectively. Absolute EBITDA stood at Rs579Mn Vs Rs271Mn in Q1FY24. ? Plywood EBIT margins came in at 6.3% Vs 5.2%/7.6% in Q1FY24/Q4FY24 respectively. MDF EBIT margins came in at 9.3% Vs 6.3% in previous quarter.

* Net profit (excl adjustment of discontinued operations) stood at Rs332Mn. PAT was higher due to tax refund of Rs257.49Mn received during the quarter which was relating to the period prior to demerger pursuant to the Composite Scheme of Arrangement between Greenply Industries Limited and Greenpanel Industries Limited, and in accordance with the agreement dated 24th January 2020 between the said parties, 50% of the said amount is required to be shared with Greenpanel.

Segmental Highlights for Q1FY25

Plywood (77% of Revenue)

* Volumes grew by 9%YoY to 17.7msqm (2-Year CAGR stood at 5%), ASP came in at Rs245 Vs Rs249/Rs244 in Q1FY24/Q4FY24. EBITDA margins came in at 7.9% as compared to 8.7%/8.6% in Q1FY24/Q4FY24 respectively. Volume-mix of Own/JV/outsourced stood at 62%/1%/37% as compared to 55%/6%/39% and 57%/3%/40% in Q1FY24 and Q4FY24.

MDF (23% of Revenue)

* Volumes stood at 42,724cbm with an ASP of 30,826 which improved by 8%QoQ owing to increase in mix of Pre-lam MDF which constituted 17% of MDF vols in Q1FY25 Vs 11% in previous quarter. EBITDA margins stood at 16.7% Vs 14.5% in previous quarter. Hence EBITDA/cbm improved to Rs5,149 Vs Rs4,152 in Q4FY24. Working capital days also improved for MDFs to 39-days Vs 44-days in March’24.

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