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Research
Greenply Industries - Largest player with wide product range & strong distribution network - Dolat
Posted On : 2013-06-22 00:46:55( TIMEZONE : IST )
Greenply Industries Limited (GIL) is India's largest wood panel company with FY13 revenues in excess of Rs 20bn, providing range of products for interior infrastructure needs - commercial and residential. GIL offers the most comprehensive portfolio including plywood, decorative laminates, decorative veneers and Medium Density Fibreboard. Greenply having presence across 19 Indian states and more than 70 counties offers its range of products through wide network of 13,000+ retail outlets.
Wood Panel Industry Growing at 10-12% CAGR
The Indian Interior Infrastructure Industry has been growing at a rapid pace over the last few years. One of the major verticals of the interior infrastructure industry includes the wood panel segment [comprising of plywood, laminates & veneers and particle boards (PB) & Medium Density Fibreboard (MDF)]. The current size of the wood panel market in India stands at Rs 280bn which has been growing at a CAGR of 10-12% over the last few years.
Re-rating potential continues
GIL has grown at a revenue and PAT CAGR of 27% and 126% respectively over FY11-13. Despite the stock having appreciated by more than 125% within a year, we believe that the there is a further scope of rerating from the current levels. We expect GIL to report revenue and PAT CAGR of 14% & 19% respectively over the next two years (FY13-15E). ROCE too is expected to expand by ~200bps to 21% by FY15E. Initiate coverage with a TP of Rs 624 (valuation on SoTP basis).
Capex Intensity to rise post FY14 - Our Key Concern
GIL has big expansion plans in the MDF and laminate segments (announcement likely over the next couple of quarters). We have assumed a capex of Rs 9.4bn (including Rs 6bn for the new greenfield MDF project, Rs 2.5bn for two greenfield laminate projects and Rs 0.2bn for new plywood project at Myanmar apart from Rs 0.7bn to be spent for maintenance capex across divisions) over FY14-17E. Any capex announcement which is higher and faster than anticipated would negatively impact the return ratios of FY14-15E and thus pose a threat to potential re-rating.
