Hold Greenply Industries; target of Rs 270: JM Financial

JM Financial's research report on Greenply Industries

Greenply continued its weak performance with low-single-growth in plywood volume in 4QFY18 (led by low-end segment and a drop in realisations) while MDF volume fell 25% YoY on intense competition (took a series of price cuts in 4QFY18). Adjusted for GST refund (INR 170mn) and forex loss (on MDF borrowing), the ply/MDF segments’ EBITDA declined 23%/36% YoY. The impending demerger (premium plywood unit in Rudrapur will go to the MDF business; will need to create a new distribution set-up for ply) may result in a market share loss for Greenply.

Outlook

We now value Greenply using SoTP (plywood business at 16x; MDF at 20x) to arrive at a Mar’19 TP of INR 270. We remain cautious and maintain HOLD