Greenply Industries - Higher gross margin aids outperformance - ICICI Securities

Greenply Industries (MTLM) has reported better-than-expected Q1FY21 earnings with loss before tax coming in at Rs132.6mn (I-Sec: Rs183mn), largely due to lower-than-anticipated decline in its consolidated EBITDA at Rs28.4mn (I-Sec: Rs-90mn). EBITDA outperformance was led by higher gross margin and recently initiated cost-control measures. MTLM reported gross margin of 46.7%, up 460bps and 770bps QoQ, largely driven by favourable revenue mix (higher share of Gabon revenues). Consolidated revenue growth declined 62% to Rs1.33bn (I-Sec: Rs1.35bn), down 62% YoY. While demand recovery (ex-Gabon) is likely to be on gradual basis, we expect margins to recover faster led by cost-saving initiatives and stable input costs. Maintain BUY.

- Valuation and outlook: Considering Q1FY21 performance and better-than-anticipated recovery in Jul'20, we increase our revenue/PAT estimates by 8.3%/3.7% and 20.4%/5.1% for FY21E/FY22E, respectively. We now expect MTLM to report revenue and adjusted PAT CAGRs of -2.1% and -8.8%, respectively, over FY20-FY22E. Given the sharp correction in the stock price and firm double-digit RoCEs, we maintain BUY with a revised target price of Rs119 (earlier: Rs113), valuing the stock at 18x FY22E earnings.

- Consolidated revenue declined 62% YoY. Standalone plywood revenue declined 65% to Rs1071bn due to similar volume decline (decorative veneer sales reported a sharper decline than plywood volumes). Gabon operations, on the other hand, reported 43% YoY lower-than-anticipated decline in revenue at Rs251mn aided by incremental EU orders post the recent commissioning of the expanded capacity. Going forward, we expect MTLM's overall revenue to exhibit -2.1% CAGR over FY20-FY22E, with gradual recovery factored in its standalone plywood business and faster recovery in its Gabon operations with expected pick-up in commercial veneer exports (particularly to Europe and US).

- Consolidated EBITDA margin beat at -2.1% led by higher gross margin and cost-control initiatives. MTLM reported consolidated EBITDA margin of -2.1% (I- Sec: -6.7%). The beat was largely on the back of cost-control initiatives introduced recently and higher gross margins (driven by larger share of Gabon revenues) which went up sharply by 460bps YoY and 770bps QoQ. Other expenses came down by 51% YoY led by aggressive cost-control measures. Standalone margin came in at - 4.7% vs 11.1% YoY, while Gabon operations reported EBITDA margin at 9.2% vs 18% YoY. Going forward, we expect MTLM's consolidated EBITDA margin to recover back to 11% level by FY22E driven by its cost-saving initiatives and expected volume recovery in both the businesses.

- Consolidated loss before tax at Rs132.6mn (I-Sec: Rs183mn), led by better than expected operational performance: MTLM reported loss before tax at Rs133mn (I-Sec: Rs183mn) vs PBT of Rs302mn YoY led by better than expected operational performance. However, lower tax provisioning led to lower loss after tax at Rs113mn (I-Sec: Rs133mn).

Shares of GREENPLY INDUSTRIES LTD. was last trading in BSE at Rs.86.4 as compared to the previous close of Rs. 87.6. The total number of shares traded during the day was 13617 in over 365 trades.

The stock hit an intraday high of Rs. 89.5 and intraday low of 85.1. The net turnover during the day was Rs. 1189440.

Source : Equity Bulls

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