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Robust Volume Growth Ahead, Backed by Capacity Expansion

MTLM delivered a strong start to FY27 with double-digit volume growth across both, Plywood and MDF segments, despite facing significant cost headwinds from elevated chemical prices driven by geopolitical tension. The management proactively implemented price hike across segments to protect margin. MDF remained the key growth driver with a strong volume, revenue and margin performance, supported by the new flooring line. Plywood was temporarily impacted by lower utilisation due to labour shortage and election in this quarter, while the Furniture JV remained loss-making but is expected to break even by mid-next year.

We continue to have a positive stance on MTLM owing to

1) Expected volume/realisation CAGR of 9.5/2.0%, respectively, over FY26–29E for the Plywood segment (which exceeds industry growth forecast of ~7% CAGR over the same period) driven by market share gains from unorganised players,

2) 20.0/3.0% volume/realisation, respectively, CAGR in MDF segment over FY26–29E

3) Revenue contribution from the new JV, BV Samet, from FY27

We forecast MTLM Revenue/EBITDA/PAT to expand at 16.3/23.8/32.1% CAGR, respectively, over FY26–29E.

Valuation: We maintain our 'BUY' rating on MTLM with a revised target price of INR 400/share (from INR 355/share earlier), implying an upside of 34% from CMP of INR 299. We continue to value MTLM on a PE-based framework and now assign a multiple of 22x FY28E core EPS of INR 18.5 (vs. 20x earlier), as we factor in the company's accelerating capacity expansion, sustained volume growth momentum, and strengthening market footprint  which, in our view, warrant a re-rating from historical trading multiples. Even at the revised multiple, MTLM continues to trade at a reasonable PEG ratio of ~1.2x on our target price, indicating that the stock's growth-adjusted valuation remains attractive and leaves room for further re-rating as earnings visibility improves

Risks: Possible slowdown in real estate and home improvement activities and probable higher timber cost are risks to our BUY rating.

Q1FY27: Healthy Volume Growth and Better Realisation Support Strong Performance

* Plywood Segment: Q1FY27 volume came in at 19.4 Mn SQM, up +13.5% YoY, but down 14.9% QoQ vs Choice Institutional Equities (CIE) estimate of 20.5 Mn SQM. Realisation at INR 265/SQM is up 3.9/4.3% YoY/QoQ, respectively, vs CIE estimate of INR 254/SQM. As a result, revenue grew by 16.0% YoY, but down 10.5% to INR 5,266 Mn (including other related products revenue of INR 134 Mn) vs CIE estimate of INR 5,207 Mn. EBITDA margin came in at 8.4% (+50/-200 bps YoY/QoQ, respectively), which is lower than CIE estimate of 9.0%. Overall, Plywood segment performance was stronger than expected, owing to higher revenue and realisation in this quarter

* MDF Segment: Q1FY27 volume came in at 57,805 CBM (+24.7/-6.8% YoY/QoQ, respectively) vs CIE estimate of 56,000 CBM, which is encouraging. Realisation came in at INR 33,525/CBM, up 5.5/9.9% YoY/QoQ, respectively, vs CIE estimate of INR 32,087/CBM. Revenue came in at INR 1,938 Mn (+31.6/2.4% YoY/QoQ, respectively) vs CIE estimate of INR 1,797 Mn. EBITDA margin came in at 17.3%, remained flat on YoY/QoQ vs CIE estimate of 15.0%

* Q1FY27 revenue up by 20.7% YoY, but down 6.6% QoQ to INR 7,249 Mn vs CIE estimate of INR 7,396 Mn. EBITDA grew by 27.1% YoY, but down 16.0% QoQ to INR 783 Mn. EBITDA margin came in at 10.8% (+55/-121 bps YoY/QoQ, respectively) vs CIE estimate of 10.3%

* RPAT increased 32.0/21.1% YoY/QoQ, supported by higher efficiency. On QoQ, RPAT came in higher in the absence of exceptional losses (as compared to Q4FY26's INR 151.6 Mn)

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