Hold Greenply Industries; target of Rs 175: ICICI Direct

ICICI Direct's research report on Greenply Industries

Greenply Industries’ (GIL) topline grew 18.1% YoY to Rs 516.2 crore on account of strong growth in plywood business and better-than-expected MDF revenue growth. EBITDA margins contracted sharply by 273 bps YoY (227 bps contraction QoQ) to 10.3% due to low capacity utilisations at AP MDF plant and change in MDF sales mix with increase in export volumes. PAT declined 17.3% YoY to Rs 27.0 crore on account of higher finance cost.

Outlook

We remain positive on GIL on a medium to long term basis as the share of organised plywood players is set to expand with increasing compliance towards e-way bill, higher brand aspirations & GIL’s strong brand recall. However, due to MDF supply glut in domestic market, MDF prices could take some time to stabilise. Also, while MDF margins are expected to stabilise at ~17% in the interim, they are still below our initial expectations of 20-25%. We rollover our valuation on FY21E estimates & maintain HOLD recommendation on the stock with a TP of Rs 175/share (~13x FY21E EPS).