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Healthy plywood growth and greater MDF utilisation would drive Greenply’s domestic performance. Overseas demand expected to be soft. Expected input-cost easing would expand margins. The stock trades at attractive valuation; we retain a Buy, at a lower TP, 15x FY25e earnings.

Plywood division: decent growth, sustainable profitability. Trading and its asset-light model provides Greenply flexibility to raise volumes on mounting demand. The Sandila (UP) manufacturing plant (13.5m sq.mtr) commissioned in Q1 FY23 is near optimum utilisation and commissioning of the 7.5m sq.mtr. capacity at Hapur, UP (a partner facility) is expected soon (Mar’23). An 11.4% volume CAGR expected over FY22-25. Prices of chemicals have declined, and high timber prices have started to cool. Hence, margins are expected swing up.

High-growth medium-density fibre-board to begin operations, margins have moderated. MDF capacity (240,000 cu.mtrs) at Vadodara is expected to begin by Q1 FY24. Robust demand led to domestic manufacturers scaling up capacities, besides increasing imports. This led to margins steeply sliding from highs of 30-32%; 23-25% however, seems sustainable.

Gabon operation traversing a rough patch; yet to pick up pace. The energy crisis in Europe on the Russo-Ukraine war led to project cancellations. Q1/Q2 volumes, though, were decent but Q3 was a washout. Some orders have come in Q4. Demand is still weak; but FY24 performance would be better.

Trades at attractive valuation; potentially a dark horse. Considering 9M FY23 performance, we lower FY23e/FY24e/FY25e earnings 10%/20%/12%. 21%/26% revenue/earnings CAGRs over FY22-25 anticipated. We believe the stock could be a dark horse: it trades at attractive valuations (much lower than peers). We, thus, retain our Buy, at a lower TP of Rs 230 (15x FY25e earnings), earlier Rs.262 on 15x FY25e earnings.

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