News & Analysis » India

Greenply Industries 3QFY2012 performance highlights and results update

Contributed by Angel Broking

Greenply Industries (GIL) registered strong top-line growth in 3QFY2012. The company’s net sales grew by 32.1% yoy and 1.2% qoq to Rs.419cr. GIL reported 146bp yoy expansion in OPM to 10.4% mainly due to lower raw material costs. OPM would have expanded further but the company reported forex loss to the tune of Rs.7cr during the quarter. Net profit increased by 96.0% yoy to Rs.14cr. We believe the company is well placed to benefit from its laminate capacity expansion, improved utilisation levels of the MDF plant and expansion in the plywood segment. Hence, we maintain our Buy view on the stock.

Top line posts strong growth yoy: For 3QFY2012, GIL’s top line grew by 32.1% yoy to Rs.419cr mainly due higher utilsation in the MDF segment during the quarter and robust growth of 21.4% and 11.8% yoy in plywood and laminate segments. The company going ahead will hedge their forex exposure for the coming quarters and thus we expect forex loss to be minimal which will result in better margin and profitability going ahead.

Outlook and valuation: We believe the concerns related to the MDF segment have receded considerably. Hence, higher utilisation levels in the MDF segment will aid in improving GIL’s overall margins on a qoq basis going ahead. The MDF segment is expected to achieve 60% utilisation in FY2012. Further, the company is well placed to benefit from 1) its laminates capacity expansion, which increased nearly two-folds in FY2010 and is expected to achieve 100%+ utilisation in FY2012 and 2) expansion of its plywood capacity by 3.75mn sq. ft., which is expected to contribute around Rs.45cr to FY2012 top line. At Rs.211, the stock trades at 5.9x FY2013E earnings. We maintain our Buy rating with a revised target price of Rs.285, valuing the stock at 8x FY2013E earnings.