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Record plywood volumes, MDF turns EBITDA positive!

Result Synopsis

Greenply Industries Ltd (GIL) reported a healthy quarter wherein revenue grew by 23%YoY & 28%QoQ to Rs6.07Bn. Plywood biz reported record volumes of 19.1msm, registering a strong growth of 11%YoY & 17%QoQ (2-year CAGR stood at 10%), largely driven by higher growth in value segment which constitutes 43% of plywood sales Vs 37% in Q2FY23. Management reiterated their volume growth guidance of 8- 10% for plywood. Margins of Plywood segment were under pressure owing to higher input cost & change in product-mix. However, with stability in timber prices coupled with price hikes taken in Aug-Sep’23, management stated that margins will be better in H2FY24. Gabon biz continues to face headwinds due to on-going political challenges & company does not foresee any major turnaround in this fiscal.

MDF biz registered volumes of 31,019cbm for the quarter at an avg realization of Rs28,692/cbm, translating into revenue of Rs890Mn Vs Rs180Mn in Q1FY24. During the quarter, MDF biz turned EBITDA positive with margins of 16%. Company is all set to achieve their annual guidance of 100,000cbm for FY24. Moreover, management is focused on enhancing the contribution of value-added products which will expand the realizations & margins of this segment.

We continue to remain positive on company’s growth, hence we expect Revenue/EBITDA/PAT growth of 20%/40%/36% respectively over FY23-FY25E. We expect plywood division to register steady growth of 9%CAGR over FY23-FY25E & with ramp-up in MDF segment, consolidated top-line of the company should accelerate. Moreover, with better margins in MDF biz & expected improvement in Plywood margins, blended operating margins are likely to come in at 12.3% by FY25E.

At CMP, the stock trades at lucrative P/E(x) of 12x on FY25E EPS of Rs13.9. We continue to value the company at P/E(x) of 18x on FY25E EPS & maintain our target price of Rs250 with a BUY rating.

Result Highlights

* Consol Revenue stood at Rs6.07Bn, a growth of 23%YoY & 28%QoQ.

* EBITDA margins came in at 8.4% Vs 9.9%/6.3% in Q2FY23/Q1FY24 respectively. Absolute EBITDA stood at Rs513Mn, a growth of 5%YoY & 72%QoQ.

* Net profit stood at Rs140Mn, a decline of 41%YoY largely owing to higher depreciation & finance cost related to MDF plant.

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