Buy Greenply Industries; target of Rs 110: Anand Rathi

Anand Rathi 's research report on Greenply Industries

Marred by its India operation, Greenply’s Q1 was weak. Against 50% utilisation in India, Gabon operated at a higher 80% in Q1. Gabon’s FY21 revenue is likely to be closer to the FY20 level. Gradual recovery is expected in India in FY21 and a bounce back only in FY22 on improved consumer sentiment for home renovation/purchases. Thus, on backward integration and tight cost control, Greenply expects an ambitious 400bp margin expansion and debt-free status by FY23.

Outlook

On Greenply’s leading position in plywood, backward-integration, strong balance sheet and attractive valuations (11x FY22e P/E), we retain our Buy rating, with an unchanged target of `110 (14x FY22e P/E). Domestic recovery and a ramp-up at Gabon are key monitorables.