Buy Greenply Industries Ltd For Target Rs.400 by Choice Institutional Equities
Resilient Demand Sustains Volume Growth, Profitability Improves
MTLM delivered a healthy Q2FY27 performance, with double-digit revenue growth across Plywood and MDF, despite capacity constraint. Both segments reported an increase in profitability driving overall EBITDA higher by 57.2% YoY. Volume growth was limited due to capacity constraint, MTLM is incurring significant capex of INR 6.8 Bn to increase both, Plywood and MDF, capacities. Samet JV (on track for divestment 50% to 19% by January 2027) continued to incur a loss, reporting a PAT loss of INR 126 Mn, of which MTLM share stood at INR 63 Mn
Q2FY27: Earnings Come in above Expectation
* Plywood volume grew by 6.1% YoY to 23.0 Mn sq. mtr and realisation was up 9.1% YoY to 264/sq. mtr, driving plywood revenue growth by 15.5% and PAT up by 46.9%
* MDF volume grew by 16.1% YoY to 54,605 CBM and realisation remained flat (+1.9% YoY), which led to a revenue growth of 18.4%. Margin for MDF segment expanded by 690 bps driving EBITDA to INR 264 Mn
* Net revenue grew 16.1% YoY to INR 7.99 Bn (in line with CIE Est. of INR 8.1 Bn)
* EBITDA grew by 57.2% YoY to INR 892 Mn (beating CIE est. by 21.3%), with a margin of 11.2% (+291 bps YoY, +36 bps QoQ)
* PAT grew 166.4% YoY to INR 426 Mn (beating CIE est. by 21.0%); PAT margin was 5.3% (+301 bps YoY, +15 bps QoQ
Capacity expansion to drive growth over the medium term:
MTLM has planned a capacity expansion of 13.5 Mn sq. mtr at its Odisha plywood plant, entailing a capex of INR 1.3 Bn, along with an additional 15.0 Mn sq. mtr capacity at Sandila, involving an investment of INR 1.25 Bn. Further, the company is expanding its MDF capacity by 210K CBM at Vadodara, with a capex of INR 4.25 Bn. These expansions are expected to take the company's total capacity to 81.3 Mn sq. mtr in Plywood and 510K CBM in MDF by FY28E
Valuation & View
We rationalise our capex estimate to account for elevated capex guidance and new plants for both segments. We believe persistent demand will lead to 9.7% and 19.4% volume CAGR for the Plywood and MDF segments, respectively. While we have increased our margin forecast by ~55–46 bps for FY27E / FY28E, higher depreciation and interest cost lead to a cut in net income. We now project Revenue / EBITDA / PAT to expand at 16.6% / 25.2% / 49.2% CAGR, respectively, over FY26–29E. We maintain the target price at INR 400/share by applying a PE of 22.0x. Our valuation implies a PEG of 0.4x. We, therefore, retain a ‘BUY’ rating with an upside of 42.9%.
Risks
Possible slowdown in real estate and home improvement activities and probable higher timber cost.
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SEBI Registration no.: INZ 000160131
