Buy Greenpanel Industries Ltd For Target Rs.445- Yes Securities
Result Synopsis
Greenpanel Industries Ltd (GREENP), registered a sluggish quarter wherein top?line degrew by 8%QoQ & remained flattish YoY at Rs4.2Bn (Est Rs4.15Bn). MDF biz (86% revenue declined by 8.5% QoQ owing to 6% degrowth in volumes and 2.5% contraction in realization (export prices dropped sharply by 19%QoQ) over similar period. Plywood biz also reported benign numbers wherein volumes stood at 1.98msqm, degrowth of 3%QoQ & 19%YoY & realizations improved 6%YoY but contracted by 3%QoQ, resulting into revenue decline of 14%YoY & 6%QoQ.
Domestic demand is decent, but company’s volume off?take was impacted owing to rising imports which stood at ~50,000cbm in Q3FY23. Hence, GREENP pivoted to export markets, but company had to take price cuts of ~12% which resulted into low? single digit margin in Q3FY23. Additionally, GREENP incurred forex loss of Rs173Mn which impacted the profitability. Company guided for a 10?15% volume growth in FY24 with EBITDA margins of ~25% in MDF segment.
We believe, MDF industry will continue to grow at CAGR of 15?20% for next?5 years & GREENP will be one of the biggest beneficiaries of the same. Factoring the import threat & rising domestic competition, we have revised our revenue & margins expectations for FY24E. At CMP, we believe the stock is available at lucrative valuations of P/E(x) of 14.5x on FY24E EPS & major headwinds seems to be factored. Hence though we have revised our FY24E earnings downwards by 16%, we retain our BUY rating on the stock.
Result Highlights
*Revenue for the quarter stood at Rs4.20Bn (Vs est Rs4.15Bn), flattish as compared to Q3FY22 & 8% degrowth QoQ. MDFs (86% of revenue), reported revenue decline of 8.5%QoQ & remained flat YoY. Plywoods (14% of revenue), registered a decline of 14%YoY & 6%QoQ.
*/ EBITDA margins came in at 22% (est 23%) as compared to 26.2%/25.5% in Q3FY22/Q2FY23 respectively. Absolute EBITDA degrew by 17%YoY & 21%QoQ to Rs920Mn.
* Net profit stood at Rs376Mn, reporting a degrowth of 41%YoY & 48%QoQ. Company incurred a forex loss of Rs173Mn which impacted the net profit.
* MDF volumes stood at 118,218cbm, reporting a decline of 2%YoY & 6%QoQ. ASP/cbm stood at Rs30,585 as compared to Rs29,025/Rs31,229 in Q3FY22/Q2FY23 respectively. MDF margins came in at 25.6% in Q3FY23 Vs 30.5%/30.4% in Q3FY22/Q2FY23 respectively.
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