Greenply Industries - 1QFY2013 Result Update - Angel Broking

Greenply Industries (GIL) registered strong top-line growth in 1QFY2013. The company's net sales grew by 22.2% to Rs.431cr. GIL reported a 81bp yoy expansion in its OPM to 11.6%, despite forex loss of Rs.7cr during the quarter. Net profit increased by 38.7% yoy to Rs.18cr. We believe the company is well placed to benefit from its laminate capacity expansion, improved utilization levels of the MDF plant and expansion in the plywood segment. Hence, we maintain our Buy view on the stock.

Top line posts strong yoy growth margins exoand: All three segments reported strong growth during the quarter. The plywood segment registered 13.6% yoy growth to Rs.203cr and the laminate segment registered 20.3% yoy growth to Rs.154cr. The MDF segment was the company's main growth driver during the quarter, registering Rs.74cr of revenue vs. only Rs.46cr in 1QFY2012, up 60.6% yoy. During the quarter, the company reported other income of Rs.1cr and forex loss of Rs.7cr. PAT increased by 38.7% yoy on the back of higher revenue, margin expansion and other income during the quarter. Going ahead, we expect revenue to further increase on account of better utilization in the MDF segment and improved revenue mix in the laminate segment.

Outlook and valuation: We believe concerns related to the MDF segment have receded considerably. Hence, higher utilization levels in the MDF segment will aid in improving GIL's overall margin on a qoq basis going ahead. The MDF segment is expected to achieve 90% utilization in FY2013. Further, the company is well placed to benefit from 1) its laminates capacity expansion, which increased nearly two-folds in FY2010 and is expected to achieve 100 %+ utilization in FY2013 and 2) expansion of its plywood capacity by 3.75mn sq. ft. coming on line. At Rs.191, the stock trades at 4.3x FY2014E earnings. We maintain our Buy rating on GIL with a revised target price of Rs.265, valuing the stock at 6x FY2014E earnings.

Source : Equity Bulls

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