Buy Greenpanel Industries; target of Rs 459: Prabhudas Lilladher

Prabhudas Lilladher's research report on Greenpanel Industries

Greenpanel (GREENP) maintained its MDF volume growth guidance between 12-15% with MDF EBITDA margin between 23-25% for FY24, even after 7.4% decline in MDF volume in Q1FY24 (considering strong traction in volume in H2FY24). Plywood is also expected to deliver 10% volume growth in FY24 despite severe fall (-37.1% YoY on higher base) in Q1FY24. Consolidated EBITDA margin contracted to 17% with oneoff expenses like 1) maintenance shutdown of MDF plant, 2) increase in logistics exp. 3) higher adv. & promotion expenses, while excluding oneoff EBITDA margin was ~20% in Q1FY24. Higher timber prices continue to impact margins in coming quarters while management remains confident of compensating it with higher volume growth. We are maintaining our positive view considering 12.7% MDF volume growth and 22.1% EBITDA margin in MDF segment (MDF contributes ~86% rev.) in FY24. We estimate FY23-25E Revenue/EBITDA/PAT CAGR of 8.9%/2.8%/0.7%, with MDF volume CAGR of 17.4% and EBITDA per CBM of around Rs 6,060 in FY25. The company is well-positioned for growth and value creation given its 1) leading position in domestic MDF segment, 2) strong growth prospects in domestic MDF demand, 3) planned capacity increase of 35% over FY23-25 and 4) extensive distribution network.

Outlook

We have tweaked our FY24/FY25 earnings to adjust oneoff expenses in Q1FY24 and adoption of new tax regime by GREENP. We value the stock at 21x FY25 EPS and arrive at TP of Rs459 (Rs 455 earlier). Maintain ‘BUY’ rating.