Buy Greenpanel Industries; target of Rs 449: YES Securities

YES Securities' research report on Greenpanel Industries

The MDF biz of GREENP registered a decent volume of 137,265cbm, a growth of 10%YoY & 16%QoQ. Blended realizations declined sharply by 10%YoY & 8%QoQ owing to higher sales from exports which stood at 31% of total volumes as compared to 18%/21% in Q4FY22/Q3FY23 respectively wherein realizations contracted by 22%YoY & 6%QoQ. Consequently, margins of MDF biz came in at 21.9% (Vs est of 23%), as compared to 34.6%/25.6% in Q4FY22/Q3FY23 respectively. EBITDA/Cbm stood at Rs6,159 as against Rs10,830/Rs7,830 in Q4FY22/Q3FY23 respectively. Plywood biz witnessed major headwinds wherein volumes degrew by 17%YoY & increased by mere 3%QoQ on account of tepid demand. Additionally, the rise in timber cost led to sharp contraction in EBITDA margins which came in at 0.4% Vs 9.2%/7% in Q4FY22/Q3FY23 respectively. We expect MDF volumes to grow by 13%CAGR over FY23-FY25E on account of rapid acceptance of MDF in domestic industry & realizations to degrow by 4%, hence revenue should grow by 9% CAGR over similar period. Margins are likely to contract to 24% in FY24E & FY25E, hence MDF’s EBITDA growth will be flattish over next 2- years. For Plywood, we reckon volume & revenue to grow by 7%CAGR over FY23- FY25E & margins should be ~8%. Hence, overall, we expect Revenue/EBITDA/PAT to grow by 9%/5%/4% over FY23-FY25E.

Outlook

At CMP, stock has factored the multiple headwinds which are likely to impact GREENPs performance & hence its trading at P/E(x) of 14.7x/12.4x on FY24/FY25E EPS of Rs18.9/22.2 respectively. We have valued the stock at 20x on FY25E EPS & arrived at a target price of Rs449, retaining our BUY rating. (Imposition of ADD/CVD could lead to sharp upward revision in earnings & re-rating of the stock).