ICICI Securities research report on Greenpanel Industries
Greenpanel Industries has been trading at benign valuations ever since its listing in Oct’19 (post its demerger from Greenply Industries) largely attributed to demand and pricing headwinds in the MDF category and large capex (Rs7.9bn) committed on its Andhra Pradesh project leading to under-utilisation of its MDF assets and muted profitability. However, with faster-than-expected demand recovery in MDF category (which also seems sustainable) post Covid-19 breakout, GNPL may sweat its capacities much faster than envisaged earlier. Besides, delay in greenfield MDF projects of CPBI and Rushil Décor, coupled with stable MDF pricing and its recently initiated productivity enhancement and cost control measures at its MDF units, may drive significant improvement in its profitability going forward. Upgrade to BUY.
Outlook
With the company available at 8x FY22 earnings or 4.5x EV/EBIDTA, we upgrade the stock to BUY (HOLD earlier) with a revised TP of Rs100 (15x FY22 earnings) vs Rs39 (10xFY22 earnings) earlier.
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