Add Greenply Industries Ltd For Target Rs.252 - Yes Securities
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Our view
Greenply Industries Ltd (GPIL) reported 46%YoY growth in topline, wherein standalone biz registered 58% YoY growth largely on account of 44%YoY volume growth & 10.4% increase in realizations over similar period. Price hikes were taken by GPIL to mitigate the rise in input cost but the same was implemented with a lag which resulted into sequential contraction of gross profit margins from 43.3% in Q1FY22 to 39.8% in Q2FY22. With further price hikes & input cost unlikely to expand rapidly, we expect margins to gradually improve from H2FY22E. We believe, strong real‐estate demand & material shift in demand from unorganized to organized segment will keep the demand buoyant & with GPILs new plywood capacity expected to get operational by Q4FY22, we expect company’s plywood volume to grow by 18%CAGR over FY21‐FY24E. GPIL’s MDF unit which is likely to commence by Q4FY23, should accelerate company’s growth from FY24E.
Result Highlights
* Company sold 15.9msqm in Q2FY22, reporting stellar growth of 43%YoY & 78%QoQ. Sales volumes were above our estimates of 12.5msqm.
* Realizations for the quarter stood at Rs233/sqm as compared to Rs211/sqm & Rs235/sqm in Q2FY21 & Q1FY22 respectively.
* Revenue stood at Rs 4,324Mn reporting a robust growth of 46% YoY & 66% QoQ.
* Gross Profit margins contracted sequentially from 43.3% in Q1FY22 to 39.8% in Q2FY22 on account of higher input cost. Consequently, operational margins came in at 11.5% during Q2FY22 Vs our expectations of 11.3%
* Net profit for Q2FY22 stood at Rs319 Mn Vs Rs186 Mn/Rs41 Mn in Q2FY21/Q1FY22 respectively.
Valuation
* We expect GPIL’s Revenue/EBITDA/PAT to report 22%/34%/40% CAGR over FY21‐FY24E & operational margins to expand from 10% in FY21 to 13.3% in FY24E. Currently GPIL is trading at P/E(x) of 20.4x/16.6x on its FY23E/FY24E EPS of Rs11.4/14 respectively. We have valued the stock at 18x on FY24E EPS of Rs14‐ arriving at a target price of Rs252‐ translating into an upside of 8.5% from CMP. Hence, we have altered our rating from BUY to ADD.
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