Greenply Ind Q3FY17: Investors with long-term investment horizon can HOLD the stock

Way2wealth | April 15, 2013, midnight


  • Net sales de-grew by 14% Y-O-Y to Rs358.8crs in Q3FY17.Growth was impacted due to demonetisation measures. Plywood sales reported a de- growth of 9.1% (on a net basis). Volume de-growth in the plywood segment was at 6.8% in Q3. MDF sales declined by25.6% to Rs95.85crs in Q3FY17. MDF segment reported volume de-growth of 22.9%. Wallpapers contributed ~Rs2.68crs to topline in Q3.
  • EBITDA declined by ~25% Y-O-Y to Rs48.5crs in Q3FY17. EBITDA margins contracted by ~133bps Y-O-Y to 14.3%. Margin contraction was a trickle-down impact of de-growth of topline and higher ad expenditure to sales, whichwas at 3.1% in Q3FY17 compared to 2.8% in same quarter in previous year.However, gross margins expanded by ~410bpson account of improvement in yield, falling raw material prices (lower local timer costs) and better product mix.EBIDTA margins in the Plywood segment were higher at 12.6% and margins in the MDF segment were at 20.3% vs. 29.1%.
  • EBIT stood at Rs39.1crs in Q3FY17 recording a de-growth of 25.8% Y-O-Y, with margins declining ~200bps on a Y-O-Y basis. Segmental EBITmargins forPlywood and MDF were at10%(+290bps) and 14.7%(+/-1030bps) respectively
  • Reported Profit after Taxde-grew by 32% Y-O-Y to `23.9 crs in this quarter. PAT Margin too went down to 6.6% as opposed to 8.4% in the corresponding quarter last year.Profitability reduced on the back of lower volume growth and higher tax rates
  • Working capital cycle decreased by 9 days Y-O-Y to 53 days and Net Debt to Equity is at 0.4in Q3FY17 as compared to 0.53 in the corresponding quarter last year


Greenply enjoys a strong pan-India brand presence with a widespread distribution network. It is well poised to play out a leading trend change in the interior infrastructure space over the next few years. For the next 2 years the company is in capex mode as it is setting up a large facility for MDF production in South India, which will enable the company to treble its MDF capacity and further engrain its leadership position in this segment. MDF enjoys better return on capital and hence going into FY19 we expect the return ratios to start moving upwards. Apart from this the company is adopting an asset light model for its plywood segment. It is planning to increase its outsourcing of economy segment plywood from 22% to 30% over the next 3 years. This will enable the company to free up its in-house capacity for premium plywood production. Over the next few quarters on account of government measures on change in currency denominations the trade is expected to slowdown on account of a liquidity crunch. Apart from that we expect the real estate market recovery will also be delayed. While the near-term does seem challenging for the company we believe efforts are being made to grow market reach, expand capacity and improve margins. We believe the next few quarters will be challenging for the company in the light of the impact on the real estate sector on account of the demonetisation measures; but we believe the company is well-placed in as the long term growth trends remain intact. At the CMP of Rs254.80/- the stock trades at 23x and 21x its estimated EPS of Rs10.9/-& Rs12/- for FY17 & FY18 respectively. We advise investors with a long-term investment horizon to HOLD the stock.


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