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Greenply Industries (GIL) registered strong top-line growth in 3QFY2011. Net
sales grew 44.8% yoy and 9.6% qoq to `317cr. However, GIL reported a (398)bp
contraction in OPM to 8.9% (12.9%) mainly due to higher other expenditure
during the quarter. Net profit declined 48.4% yoy to `7.2cr (`13.9cr).
Nonetheless, we believe that the company is well placed to benefit from its
laminates capacity expansion, commencement of the MDF plant and expansion in
the plywood segment. Hence, we maintain a Buy on the stock.
Top-line posts strong growth, margins improve qoq: For 3QFY2011, top-line
reported 44.8% yoy growth to `317cr (`219cr) mainly on the back of the laminate
capacity expansion, higher capacity utilisation and increase in realisations during
the quarter. The plywood segment reported 119% capacity utilisation and
realisation increased to `217/sq mt from `205/sq mt qoq. The laminate segment
reported average capacity utilisation of 94% for the quarter. Average realisation
of laminates increased to `488/sheet in 3QFY2011 from `466/sheet in
2QFY2011. OPM contracted by 398bp yoy, but improved by 111bp qoq to 8.9%.
Thus, on account of lower OPM, higher depreciation and interest cost at the new
MDF unit (contributed a marginal `14cr to sales during the quarter), net profit
declined by 48.4% yoy to `7.2cr (`13.9cr).
Outlook and Valuation: We believe that the company is well placed to benefit
from its laminates capacity expansion (which increased nearly two-folds in
FY2010), commencement of the new MDF plant at Uttarakhand, which will
contribute to revenues in 4QFY2011E as well as expansion of its plywood
capacity by 3.75mn sq ft, which is expected to contribute ~`45cr to FY2012
top-line. We have revised downwards our OPM estimates to factor in the decline
during 9MFY2011 as well as the delayed commencement of the MDF unit. At
`184, the stock trades at 5.5x FY2012E earnings. We maintain a Buy on the
stock, with a Target Price of `266, valuing the stock at 8x FY2012E EPS.
Investment Arguments
Banking on MDF and laminates
GIL is foraying into the lucrative, high-growth MDF market, with the largest MDF
plant in India (1,80,000m3/yr capacity), while continuing its strong expansion in
laminates (88% capacity expansion), that is estimated to drive 25% CAGR in sales
over FY2010-12E. GIL is witnessing very strong demand for its laminate products,
with both its new production lines running at full capacity. The MDF opportunity is
especially huge: MDF constitutes 20% of wood panel consumption in India, while
plywood constitutes 80% - the reverse holds true globally. China alone consumes
10-11mn m3/yr of MDF v/s 0.6mn m3/yr in India. Going forward, with a strict
control on issue of new plywood licenses and 5-7% CAGR in panel demand, MDF
is likely to meet this demand, translating into 25-30% CAGR for MDF. Moreover,
even out of present consumption, 80% is being met through imports, which GIL
can substitute given high freight costs and 25% anti-dumping duty on imports.
Strong brand, high ad-spend and massive distribution
GIL has leading plywood and laminates brands, supported by ad-spend as high as
4.3% of sales. The company also has the largest distribution network of over
15,000 dealers in this industry. These advantages underpin the strong RoE profile
of the company's brand-driven business model (20% over FY2010-12E).
Outlook and Valuation
We believe that the company is well placed to benefit from its laminates capacity
expansion (which increased nearly two-folds in FY2010), commencement of the
new MDF plant at Uttarakhand, which will contribute to revenues in 4QFY2011E
as well as expansion of its plywood capacity by 3.75mn sq ft, which is expected to
contribute around `45cr to FY2012 top-line. At `184, the stock trades at 5.5x
FY2012E earnings. We maintain a Buy on the stock, with a Target Price of `266,
valuing the stock at 8x FY2012E EPS.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Greenply Industries – 3QFY2011 Result Update
Angel Broking maintains a Buy on Greenply Industries with a Target Price of Rs. 266.
Greenply Industries (GIL) registered strong top-line growth in 3QFY2011. Net
sales grew 44.8% yoy and 9.6% qoq to `317cr. However, GIL reported a (398)bp
contraction in OPM to 8.9% (12.9%) mainly due to higher other expenditure
during the quarter. Net profit declined 48.4% yoy to `7.2cr (`13.9cr).
Nonetheless, we believe that the company is well placed to benefit from its
laminates capacity expansion, commencement of the MDF plant and expansion in
the plywood segment. Hence, we maintain a Buy on the stock.
Top-line posts strong growth, margins improve qoq: For 3QFY2011, top-line
reported 44.8% yoy growth to `317cr (`219cr) mainly on the back of the laminate
capacity expansion, higher capacity utilisation and increase in realisations during
the quarter. The plywood segment reported 119% capacity utilisation and
realisation increased to `217/sq mt from `205/sq mt qoq. The laminate segment
reported average capacity utilisation of 94% for the quarter. Average realisation
of laminates increased to `488/sheet in 3QFY2011 from `466/sheet in
2QFY2011. OPM contracted by 398bp yoy, but improved by 111bp qoq to 8.9%.
Thus, on account of lower OPM, higher depreciation and interest cost at the new
MDF unit (contributed a marginal `14cr to sales during the quarter), net profit
declined by 48.4% yoy to `7.2cr (`13.9cr).
Outlook and Valuation: We believe that the company is well placed to benefit
from its laminates capacity expansion (which increased nearly two-folds in
FY2010), commencement of the new MDF plant at Uttarakhand, which will
contribute to revenues in 4QFY2011E as well as expansion of its plywood
capacity by 3.75mn sq ft, which is expected to contribute ~`45cr to FY2012
top-line. We have revised downwards our OPM estimates to factor in the decline
during 9MFY2011 as well as the delayed commencement of the MDF unit. At
`184, the stock trades at 5.5x FY2012E earnings. We maintain a Buy on the
stock, with a Target Price of `266, valuing the stock at 8x FY2012E EPS.
Investment Arguments
Banking on MDF and laminates
GIL is foraying into the lucrative, high-growth MDF market, with the largest MDF
plant in India (1,80,000m3/yr capacity), while continuing its strong expansion in
laminates (88% capacity expansion), that is estimated to drive 25% CAGR in sales
over FY2010-12E. GIL is witnessing very strong demand for its laminate products,
with both its new production lines running at full capacity. The MDF opportunity is
especially huge: MDF constitutes 20% of wood panel consumption in India, while
plywood constitutes 80% - the reverse holds true globally. China alone consumes
10-11mn m3/yr of MDF v/s 0.6mn m3/yr in India. Going forward, with a strict
control on issue of new plywood licenses and 5-7% CAGR in panel demand, MDF
is likely to meet this demand, translating into 25-30% CAGR for MDF. Moreover,
even out of present consumption, 80% is being met through imports, which GIL
can substitute given high freight costs and 25% anti-dumping duty on imports.
Strong brand, high ad-spend and massive distribution
GIL has leading plywood and laminates brands, supported by ad-spend as high as
4.3% of sales. The company also has the largest distribution network of over
15,000 dealers in this industry. These advantages underpin the strong RoE profile
of the company's brand-driven business model (20% over FY2010-12E).
Outlook and Valuation
We believe that the company is well placed to benefit from its laminates capacity
expansion (which increased nearly two-folds in FY2010), commencement of the
new MDF plant at Uttarakhand, which will contribute to revenues in 4QFY2011E
as well as expansion of its plywood capacity by 3.75mn sq ft, which is expected to
contribute around `45cr to FY2012 top-line. At `184, the stock trades at 5.5x
FY2012E earnings. We maintain a Buy on the stock, with a Target Price of `266,
valuing the stock at 8x FY2012E EPS.
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