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Our view

* Greenpanel Industries Ltd (GIL)’s Q1FY22 performance was impacted due to 2nd wave of COVID-19 in domestic markets. Plywood volumes witnessed sharp decline of 42.6% q/q in volume terms & 45.3% q/q in value terms. MDF segment witnessed 19% q/q degrowth in volume terms & 15.8% in value terms in Q1FY22. We believe with re-opening of economy in domestic markets, retail demand (68% of domestic volumes) should bounce back.

* We continue to remain bullish on the company on account of (i) rapid displacement of mid-lowend plywood segment by MDFs, (ii) growing trend of online furniture in India and (iii) replacement of imports by domestic players (imports ~18-20% of total demand). Moreover, to cater the increase in demand company is enhancing their capacity by 20% to ~660,000cmb/annum. Hence, we expect MDF volumes to grow by 18% over FY21-FY23E.

* Going ahead we factor in Revenue/EBITDA/PAT CAGR of 18.5%/29.2%/77.3% over FY21-23E respectively. Moreover, with company’s aim to strengthen its balance sheet, we expect net debt/EBITDA to decline from 1.8x in FY21 to 0.1x in FY23E.

Valuation:

AT CMP, GIL is trading at 14.2x on FY23E EPS of Rs17.6. We continue to value the company at 18.5x on FY23E EPS arriving at a target price of Rs330. Hence, we maintain our BUY rating on the stock.

Result Highlights

* Volumes: For Q1FY22 MDF volumes came in at 112,735 CBM a degrowth of 19.2% q/q. Plywood volumes reported a massive decline of 42.6% q/q to 1.75 msqm.

* Sales: Total sales for the company stood at Rs3,083 Mn (-20.7% q/q). Wherein MDF sales degrew by 15.8% q/q which was above our expectation of 20% q/q decline mainly on account of 3.7% sequential growth in realizations. Plywood revenues stood at Rs453 Mn (degrowth of 45.3% q/q), Plywood average realizations came in at Rs259/sqm Vs Rs273/sqm in Q4FY21.

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