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Our view

Greenpanel Industries Ltd (GIL) reported robust growth in Q2FY22 backed by strong volume growth in MDF which grew by 70%YoY coupled with 23%YoY growth in plywood volumes. GIL reported stellar EBITDA margins of 31.4% for MDF division and 13.6% for plywoods. During the quarter company undertook price hikes to mitigate the rise in input cost. MDF realizations improved by 17%YoY & 9%QoQ to Rs24,446/cbm, wherein export/domestic realizations came in at Rs18,863/Rs 27,167 per cbm respectively. We reckon with robust demand for MDF in coming years and company’s new capacity of 120,000cbm getting operational in Q3FY22, GIL’s MDF division is likely to witness volume growth of 20% CAGR over FY21‐FY24.

Result Highlights

* Revenue for the quarter stood at Rs4,222 Mn reporting a growth of 87.8% YoY and 36.9% QoQ. MDFs revenues increased by 32.7% QoQ / 103% YoY to Rs3,490 Mn. Plywood division registered revenue growth of 39.1% YoY and 61.7% QoQ.

* EBITDA stood at Rs1,130 Mn, a growth of 144% YoY / 64.7% QoQ. Operating margins came in at 26.8% in Q2FY22 Vs 20.6%/22.2% in Q2FY21/Q1FY22 respectively. EBITDA margins were above our estimates of 24%

* Company reported net profit of Rs671 Mn in Q2FY22 as compared to Rs184Mn/Rs298Mn in Q2FY21/Q1FY22 respectively. Net profit margins came in at 16% Vs 8.2%/9.7% in Q2FY21/Q1FY22 respectively.   

* During the quarter company reduced net debt to Rs2,229Mn as on 30th September 2021. They prepaid 4 German bank loan instalments of Euro 8.91Mn (Rs 780 Mn) in October’21. Company aims to become net debt free by FY23.

Valuation

We expect GIL to report /Revenue/EBITDA/PAT growth of 19.3%/25.4%/57% respectively over FY21‐FY24E. Currently the stock is trading at 16x on FY24E EPS of Rs21.6. We continue to value the company at 18.5x on FY24E EPS arriving at a target price of Rs400‐ implying an upside of 15%. Hence, we maintain our “BUY” rating on the stock.

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