Hold Greenply Industries; target of Rs 140: ICICI Direct

ICICI Direct's research report on Greenply Industries

We attended the analyst meet of Greenply Industries (GIL). The key takeaways are: -i) MDF industry currently operates at 50% capacity utilisation, ii) the management has guided for ~60% blended utilisation for its MDF business while Andhra MDF plant is expected to reach break-even at PBT level in FY20E, iii) on the plywood business, GIL will increase the proportion of outsourcing to 30% in the next three years and iv) the management has guided for Rs 1500-1600 crore revenues and 11.5% EBITDA margin for plywood business post de-merger. We maintain our HOLD rating on the stock as we believe pricing scenario for MDF division could take time (about two years) to stabilise on account of supply glut.

Outlook

We maintain our HOLD recommendation with a target price of Rs 140 (~14x FY20E EPS).