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Result Synopsis

Greenply Industries Ltd (MTLM) reported a steady growth in Q2FY25, which was largely in-line with our estimates. Plywood volumes grew by 6%YoY & 14%QoQ (2- year CAGR stood at 8%). Incrementally, ASP improved by 2%YoY & 2%QoQ to Rs251/sqm. For H1FY25, plywood volumes increased by 7%YoY and revenue grew by 9%YoY. Operating margins expanded marginally from 7.6%/7.9% in Q2FY24/Q1FY25 to 8.3% in Q2FY25, however. higher input costs continue to weigh on margins. For H1FY25, plywoods EBITDA margins came in at 8.1%. Contribution of own manufacturing volumes improved from 53% in Q2FY24 to 56% in Q2FY25 & in revenue terms, own manufacturing constituted 64% Vs 63% in Q2FY24.

MDF volumes were subdued at 40,553cbm, largely owing to plant shutdown taken in Sep’24. ASP improved to Rs31,169/cbm Vs Rs30,826/cbm in previous quarter. Soft volume off-take due to plant shutdown and higher input cost led to reduction in operating margins to 11.8% Vs 16.7% in Q1FY25. For H1FY25 operating margins came in at 14.3%. In Q2FY25, Base MDF constituted 86% of volumes & 82% of revenue while Pre-lam MDF constituted 14% of volumes & 18% of revenue. NWCdays for MDF segment improved to 25-days Vs 38-days in Q1FY25.

Management Guidance

For Plywoods, management maintained their guidance of 8-10%YoY growth and for MDFs, management remains confident of achieving a 50%YoY growth in FY25 with EBITDA margins of 16%. Total debt as on FY25 should stand at Rs4.5Bn.

Our View

We remain positive on Greenply’s growth trajectory and expect Plywood biz to grow by 8%CAGR owing to growing demand for woodpanel products on the back of realestate inventory reaching the handover phase. Moreover, operating margins are likely to improve by ~150bps over FY24-FY27E to 10%, on account of better product-mix and timber prices likely to soften from FY26 end. MDF division has registered a strong performance since commencement, and we reckon volumes to grow by 29%CAGR with company expanding its presence across regions backed by commencement of VAP-line by FY25 end. We have factored-in 18% operating margins for FY26E & FY27E. Incrementally, furniture & fixture JV’s phase-1 is likely to start operations from Nov’24 which is expected to be EPS accretive from FY27E. Hence, we expect overall Revenue/EBITDA/PAT to grow by 13%/27%/38% respectively over FY24-FY27E. We value the company at P/E(x) of 25x on FY27E EPS of Rs18.4, arriving at a target price of Rs461. Hence, we retain Greenply as our top-pick with a BUY rating on the stock.

Result Highlights

* Sales stood at Rs6.40Bn (5% above est), a growth of 13%YoY & 10%QoQ (2-year CAGR stood at 14%).

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