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Buy Greenply Industries; target of Rs 360: ICICI Direct

November 16
05:42 2017

ICICI Direct’s research report on Greenply Industries

Greenply Industries’ (GIL) topline grew 2.6% YoY to Rs 446.1 crore. It was in line with our estimate of Rs 438.9 crore on account of the moderate performance of the plywood division. Plywood revenues grew 2.3% YoY to Rs 315.0 crore (our estimate: Rs 300.8 crore) Gross profit margin expanded 90 bps YoY to 47.0% led by a better product mix and improved realisation in the MDF division. However, the EBITDA margin declined 50 bps YoY to 14.3% (our estimate: 15.0%) due to currency loss of Rs 6 crore on foreign currency borrowings for new MDF plant (MDF EBITDA margin was at 26% in Q2FY18 vs. 28.7% in Q2FY17) Net profit grew 3.7% YoY growth to Rs 36.4 crore and was largely in-line with our expectation of Rs 37.1 crore.

Outlook

We remain positive on GIL as the share of Indian organised plywood players (currently 30% of plywood market) is set to expand with GST rollout, higher brand aspirations and GIL’s strong brand presence. GIL’s strategy of capacity expansion across product segments like plywood, MDF and decorative veneer bodes well for the company’s future growth. We have rolled over our estimates to FY20E. We continue to maintain BUY on the stock with a revised target price of Rs 360 (20x FY20E EPS).

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