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Result review:

* Greenply Industries Ltd (GIL) reported sales of Rs3,967mn (15% y/y & 16.5% q/q), on account of healthy volume growth (18.9% y/y & 13.2% q/q) coupled with marginal increase in realizations (1.4% both y/y & q/q). Standalone sales stood at Rs3,583mn (20.9% y/y & 16% q/q). Gabon’s revenue increased by 23% sequentially but declined by 21.5% y/y to Rs373mn.  

* Utilizations for the quarter expanded to 145% Vs 122%/128% in Q4FY20/Q3FY21 respectively. For FY21, utilizations came in at 107%

* EBITDA stood at Rs455mn (52.3% y/y & 9% q/q). Operating margins came in at 11.5% as compared to 8.7%/12/3% in Q4FY20/Q3FY21 respectively. Standalone margins improved from 8.8% in Q4FY20 to 13% in Q4FY21 & Gabon’s operating margins declined from 10.9%/12.9% in Q4FY20/Q3FY21 respectively to 7.8% in Q4FY21, mainly due to rise in ocean freight cost.  

* GIL registered a net profit of Rs286mn in Q4FY21 as against a loss of Rs215mn (exceptional loss of Rs500mn) in Q4FY20. As compared to Q3FY21, PAT grew by 14.5%.

Our view:

* We believe, plywood industry is on the cusp of revival post 5 years of lull phase as real‐estate industry is set to witness uptick in demand. Additionally, rise in input cost coupled with higher working capital requirements has massively impacted unorganized players. Owing to which organized players has gained market share and this phenomenon is likely to continue in coming years. GIL (~26% market share in organized) is likely to be one of the biggest beneficiaries of the same.  

* Going ahead with new capacity expansion of 13.5msqm (adding 54% to existing capacity) & deeper penetration of outsourced brands, we expect revenues to increase by 32% to Rs20.29bn wherein Volumes/Realizations should grow by 30%/4% respectively over FY21‐23E. With increase in share of premium products (~70% of total sales) along with higher operational efficiencies, EBIDTA margins are likely to grow to 12.4%/13% in FY22E/FY23E respectively leading to EBITDA growth of 50% over FY21‐FY23E.  

* We have valued the company at 17x on FY23E EPS of Rs 14.4, arriving at a target price of Rs245 (previous target of Rs177) translating into an upside of 13% from current levels. Therefore, we maintain our BUY rating on the stock.  

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