Greenply Industries - Balance sheet correction on track - ICICI Securities

Greenply Industries (MTLM) reported an in-line Q2FY21 with consolidated revenues declining 22.3% to Rs2.96bn (I-Sec: Rs2.98bn) largely due to 31% revenue decline in its standalone plywood business while its Gabon revenues surged 64.4% YoY. EBITDA too declined 28% YoY to Rs3.23bn, which was in keeping with our estimates. The positive surprise however is an impressive debt reduction (by Rs727mn) in H1FY21 driven by strong cashflow generation on the back of stricter working capital discipline. The ongoing balance sheet correction and the expected recovery in plywood segment (post Q2FY21 driven by improving rate of occupation of premises and its stricter control on receivables) is expected to drive meaningful volume and margin recovery in H1FY21/FY22E. Maintain BUY.

- Valuation and outlook: Considering the in-line Q2FY21 performance, we maintain our revenue/PAT estimates for FY21E/FY22E. We expect MTLM to report revenue and adjusted PAT CAGRs of -3.3% and -2.8% respectively over FY20-FY22E. Given the sharp correction in stock price and firm double-digit RoCEs on the back of a strong asset-light model, we maintain BUY on the stock with an unchanged target price of Rs135, valuing it at 18x FY22E earnings.

- Consolidated revenues declined 22% YoY. Standalone plywood revenues fell 31% to Rs2.37bn due to 27% YoY decline in volumes. Plywood realisations too were down 6% YoY to Rs227/mn-sqm. Gabon operations on the other hand reported 64.4% YoY growth in revenues at Rs572mn aided by incremental EU orders post the recent commissioning of the expanded capacity. Going forward, we expect MTLM's overall revenues to exhibit -2.1% CAGR over FY20-FY22E, with gradual recovery in its standalone plywood business and faster in Gabon operations with expected pick- up in commercial veneer exports (particularly to Europe and the US).

- Consolidated EBITDA margin down 90bps YoY to 10.9% led by lower gross margin and operating deleverage. MTLM reported its consolidated EBITDA margin at 10.9% (I-Sec: 10.7%) in Q2FY21. Though the gross margin was lower by 250bps YoY, the modest beat on EBITDA margin came largely on the back of cost control initiatives introduced recently and larger share of Gabon revenues. Standalone margin came in at 10% vs 11.4% YoY while Gabon operations reported EBITDA margin at 14% vs 17% YoY. Going forward, we expect MTLM's consolidated EBITDA margin to recover back to >11% level by FY22E driven by cost-saving initiatives and expected volume recovery in both the businesses.

- Consolidated PAT declined 29.8% YoY to Rs185.5mn (I-Sec: Rs183mn) led by in-line operational performance: MTLM reported its Q2FY21 PBT at Rs240mn (I- Sec: Rs231mn) vs PBT of Rs332mn YoY led by higher other income and lower tax outgo. We expect the company to report a PAT CAGR of -2.8% over FY20-FY22E.

Shares of GREENPLY INDUSTRIES LTD. was last trading in BSE at Rs.80.6 as compared to the previous close of Rs. 79.6. The total number of shares traded during the day was 26609 in over 870 trades.

The stock hit an intraday high of Rs. 81.8 and intraday low of 78.65. The net turnover during the day was Rs. 2130101.

Source : Equity Bulls

Keywords