Buy Greenply Industries; target of Rs 265: Angel Broking

Angel Broking is bullish on Greenply Industries and has recommended buy rating on the stock with a target of Rs 265 in its July 24, 2012 research report.

“Greenply Industries (GIL) registered strong top-line growth in 1QFY2013. The company’s net sales grew by 22.2% to Rs431cr. GIL reported a 81bp yoy expansion in its OPM to 11.6%, despite forex loss of Rs7cr during the quarter. Net profit increased by 38.7% yoy to Rs18cr. We believe the company is well placed to benefit from its laminate capacity expansion, improved utilization levels of the MDF plant and expansion in the plywood segment. Hence, we maintain our Buy view on the stock.”

“All three segments reported strong growth during the quarter. The plywood segment registered 13.6% yoy growth to Rs203cr and the laminate segment registered 20.3% yoy growth to Rs154cr. The MDF segment was the company’s main growth driver during the quarter, registering Rs74cr of revenue vs. only Rs46cr in 1QFY2012, up 60.6% yoy. During the quarter, the company reported other income of Rs1cr and forex loss of Rs7cr. PAT increased by 38.7% yoy on the back of higher revenue, margin expansion and other income during the quarter. Going ahead, we expect revenue to further increase on account of better utilization in the MDF segment and improved revenue mix in the laminate segment.”

“We believe concerns related to the MDF segment have receded considerably. Hence, higher utilization levels in the MDF segment will aid in improving GIL’s overall margin on a qoq basis going ahead. The MDF segment is expected to achieve 90% utilization in FY2013. Further, the company is well placed to benefit from 1) its laminates capacity expansion, which increased nearly two-folds in FY2010 and is expected to achieve 100 %+ utilization in FY2013 and 2) expansion of its plywood capacity by 3.75mn sq. ft. coming on line. At Rs191, the stock trades at 4.3x FY2014E earnings. We maintain our Buy rating on GIL with a revised target price of Rs265, valuing the stock at 6x FY2014E earnings,” says Angel Broking research report.   

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