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Buy Greenpanel Industries Ltd For Target Rs. 532

Steady performance to continue till FY24E!

Result Synopsis

Greenpanel Industries Ltd (GPIL) reported revenue of Rs4.57Bn, a growth of 8.3%YoY. MDFs revenue (86% of sales) reported a 18%YoY growth which was lead by higher MDF prices which stood at Rs31,299/cbm Vs Rs24,445/cbm in Q2FY22. As compared to previous quarter both volumes & sales were flattish at 126,232cbm & Rs3.95Bn respectively. EBITDA margins of MDF biz came in at 30.4% Vs 31.4%/33.3% in Q2FY22/Q1FY23 respectively. Plywood division witnessed significant slowdown wherein volumes declined by 22%YoY & 19%QoQ & EBITDA margins contracted from 13.6%/11.5% in Q2FY22/Q1FY23 respectively to 7.3% in Q2FY23, largely due to rise in input cost & price hikes were insufficient to mitigate the same.

For next 12?15months with no major capacities coming?up in MDFs, the existing MDF manufacturers are likely to maintain their pricing & margins in domestic markets. With healthy demand for MDFs, we reckon GPIL to report volume growth of 13%CAGR over FY22?FY24E. Overall, we expect company’s Revenue/EBITDA/PAT to grow by 12%/6%/16% over FY22?FY24E.  We continue to believe that MDF industry will grow by 15?20%CAGR in coming 3?5years. But with ~45% new upcoming capacities & imports starting to come back owing to slowdown in global markets & lower freight cost, we reckon domestic manufacturers will witness pricing & margin pressure from FY25E. Hence, we have re?valued GPIL at P/E(x) of 20x on FY24E EPS & arrived at a target price of Rs532 (previous Rs613).

Result Highlights

* Revenue: Company reported Rs4.57Bn sales (est of Rs4.54Bn), reporting a growth of 8%YoY & remained flattish as compared to previous quarter. MDFs (86% of revenue) reported a 18%YoY topline growth largely due to higher realizations which was up by 28%YoY. Plywood revenue stood at Rs610Mn, reporting a 16%YoY & 14%QoQ decline.

* Volumes: MDF volumes stood at 126,232cbm, a degrowth of 8%YoY & remained flattish QoQ. Plywood volumes came in at 2.04msqm, reporting a 22%YoY & 19%QoQ degrowth.  

* Blended EBITDA margins came in at 25.5% (est. 27%) as compared to 26.8%/28.4% in Q2FY22/Q1FY23 respectively. MDFs margins contracted from 31.4%/33.3% in Q2FY22/Q1FY23 respectively to 30.4% in Q2FY23. Plywood margins witnessed a steep decline to 7.3% from 13.6%/11.5% in Q2FY22/Q1FY23 respectively. Absolute EBITDA stood at Rs1.16Bn, reporting a 3.3%YoY growth & a decline of 11.3%QoQ.  

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