IGI Logo

Margins decline owing to higher input prices…

About the stock: Greenply Industries (GIL) is one the leading players in the plywood business in India. It has a distribution network of 2,300+dealers/authorised stockists pan-India.

* It is foraying into the MDF boards business with greenfield manufacturing set-up at Vadodara, Gujarat of 800 CBM/day (capex of ~| 555 crore) with revenue potential of ~| 600-650 crore per annum at its peak utilisation

Q3FY22 Results: GIL reported a mixed bag performance.

* The topline at | 421.1 crore, was up 23.7% YoY driven by 20.3% growth in plywood revenues at | 373 crore with volumes up 11.4% YoY

* EBITDA margins expanded 308 bps YoY to 10.2%, owing to higher input prices

* PAT came in at | 29.8 crore, up 19% YoY, aided by higher other income and lower interest expenses

What should investors do? GIL’s share price has declined by 33% over the past five years given the challenging growth trajectory.

* We maintain our HOLD rating on the company

Target Price and Valuation: We value GIL at | 215/share (at 21x FY24E P/E)

Key triggers for future price performance:

* Planned capex in plywood and MDF business to provide additional revenue in the medium to long term

* Recovery in plywood growth momentum, which has lagged peers

* Strong brand presence, well established distribution network and product portfolio offering at varied price points; improving dealer’s network and healthy momentum in real estate to support sales growth

Alternate Stock Idea: Besides Greenply, we like Mahindra Lifespace in realty/building material segment

* A play on expanding residential real estate portfolio

* BUY with a target price of | 380

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer