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Strong brand, high ad spend: GIL is a leading plywood and
laminates brands, supported by ad spend as high as 4.0% of
sales (around 10% of laminates revenue). The company also
has the largest distribution network of over 15,000 dealers in
this industry.
Laminate capacity addition to aid growth: GIL increased its
laminates capacity by 88% in FY2010 and is witnessing strong
demand for its products. The company achieved 100% capacity
utilisation in 4QFY2011 and ended FY2011 with 94% capacity
utilisation. We expect utilisation to further improve to 110% in
FY2012, which will boost revenue going ahead.
Banking on MDF: GIL forayed into the lucrative, high-growth
MDF market in FY2011, with the largest MDF plant in India
(1,80,000m3/year capacity). The MDF opportunity is especially
huge as it constitutes 20% of wood panel consumption in India,
while plywood constitutes 80% - the reverse holds true globally.
In 3QFY2011, the segment reported first-time revenue of around
`14cr, which further improved to `32cr in 4QFY2011, due to
higher utilisation, which increased to 35% for the quarter. We
expect the segment to achieve 45% capacity utilisation by FY2012,
which would futher bolster revenue and improve margins.
New plywood license constraint: Going forward, strict control
on the issue of new plywood licenses and a 5-7% CAGR in panel
demand would result in MDF meeting this demand and
registering a 25-30% CAGR over FY2011-14E. Moreover,
currently 80% of the consumption is being met through imports,
which we believe GIL can substitute given the high freight costs
and 25% anti-dumping duty on imports.
Further expansion of licensed capacity: GIL holds licenses for
additional plywood capacity. In line with this, it has further
expanded capacity by 3.75mn sq. ft. in 4QFY2011, which will
augment its FY2012E revenue by nearly `45cr.
Currently, the stock is trading at 5.1x FY2013E earnings, which
is at the lower end of its historical average of 4.3-17.0x oneyear
forward EPS. We maintain Buy on the stock with a target
price of `270, valuing the stock at 7x FY2013E earnings
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strong brand, high ad spend: GIL is a leading plywood and
laminates brands, supported by ad spend as high as 4.0% of
sales (around 10% of laminates revenue). The company also
has the largest distribution network of over 15,000 dealers in
this industry.
Laminate capacity addition to aid growth: GIL increased its
laminates capacity by 88% in FY2010 and is witnessing strong
demand for its products. The company achieved 100% capacity
utilisation in 4QFY2011 and ended FY2011 with 94% capacity
utilisation. We expect utilisation to further improve to 110% in
FY2012, which will boost revenue going ahead.
Banking on MDF: GIL forayed into the lucrative, high-growth
MDF market in FY2011, with the largest MDF plant in India
(1,80,000m3/year capacity). The MDF opportunity is especially
huge as it constitutes 20% of wood panel consumption in India,
while plywood constitutes 80% - the reverse holds true globally.
In 3QFY2011, the segment reported first-time revenue of around
`14cr, which further improved to `32cr in 4QFY2011, due to
higher utilisation, which increased to 35% for the quarter. We
expect the segment to achieve 45% capacity utilisation by FY2012,
which would futher bolster revenue and improve margins.
New plywood license constraint: Going forward, strict control
on the issue of new plywood licenses and a 5-7% CAGR in panel
demand would result in MDF meeting this demand and
registering a 25-30% CAGR over FY2011-14E. Moreover,
currently 80% of the consumption is being met through imports,
which we believe GIL can substitute given the high freight costs
and 25% anti-dumping duty on imports.
Further expansion of licensed capacity: GIL holds licenses for
additional plywood capacity. In line with this, it has further
expanded capacity by 3.75mn sq. ft. in 4QFY2011, which will
augment its FY2012E revenue by nearly `45cr.
Currently, the stock is trading at 5.1x FY2013E earnings, which
is at the lower end of its historical average of 4.3-17.0x oneyear
forward EPS. We maintain Buy on the stock with a target
price of `270, valuing the stock at 7x FY2013E earnings
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