ICICI Direct recommended is bullish on Greenply Industries has recommended buy rating on the stock with a target price of Rs 425 in its research report dated December 26, 2017.
ICICI Direct's research report on Greenply Industries
Greenply Industries (GIL) is setting up a new MDF facility in Andhra Pradesh with a capacity of 360,000 CBM entailing a capex of Rs 750 crore (already spent Rs 530 crore till Q2FY18). Construction is in full swing while the management is aiming to commission the plant three months ahead of schedule in July, 2018. It plans to operate the plant at 60% capacity utilisation in FY19E. The new plant will cater to southern demand (30% of GIL’s MDF sales). The company would export the remaining portion. It is aiming at full utilisation by FY22E. With the commissioning of the new MDF plant, we expect, GIL’s MDF revenues to grow robustly at 33.5% CAGR to Rs 1134.6 crore over FY17-20E.
BUY! We remain positive on GIL as the share of organised plywood players (currently 30% of plywood market) is set to expand with GST rate cut, higher brand aspirations and GIL’s strong brand presence. GIL’s strategy of capex across product segments like plywood, MDF and decorative veneer bode well for the company’s future growth. Consequently, we expect topline, bottomline to grow at 19.8%, 19.4% to Rs 2842.3 crore, Rs 229.8 crore, respectively, in FY17-20E. We continue to maintain our BUY rating on the stock with a revised target price of Rs 425 (~22x FY20E EPS).
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