Greenply Industries Ltd
(BSE Code: 526797) (CMP: Rs.128.20) (FV: Re.1) By Bikshapathi Thota
Greenply Industries Ltd (Greenply) is India's largest interior infrastructure company and a leader in plywood and MDF (medium-density fibreboard) boards. It accounts for ~26% of the organized plywood market in India with ~30% market share in MDF boards. It has presence in more than 300 cities across 21 states in India through a strong retail network of 48 branches and over 12,000 distributors, dealers, sub-dealers and retailers. With 5 state-of-the-art manufacturing facilities, it offers a comprehensive portfolio of residential and commercial floor products like plywood and block boards, MDF and Wood floors under the brands ‘Greenply Plywood’, ‘Green Club Ply’, ‘Ecotec’, ‘Green Panelmax’ and ‘Green Floormax’. Greenply is setting up a 3,60,000 cubic metres per annum state-of-the-art greenfield MDF plant at Chittoor in Andhra Pradesh, which will commence commercial production shortly. It will be the largest MDF plant in Asia and fifth largest in the world. The project is estimated at ~Rs.750 crore, of which Rs.490 crore will come from borrowings, Rs.50 crore from issue of equity and the balance Rs.210 crore from internal accruals. The project will be based on short-rotation, fastgrowing plantation crops. The project will support plantation activities to the extent of 8,000-10,000 hectares annually. Greenply aims to export 30-40% of the MDF manufactured at this new plant until the domestic market is ready for absorbing the incremental capacity. Currently, it exports to the Middle East and South-East Asia and is exploring new geographies.
Greenply has explored new and innovative options for sustainable availability of veneer, a key input for plywood manufacture. It has set up a veneer plant at Gabon in West Africa. Gabon has abundant quantities of Okoume trees, which are used for producing veneer for plywood. There is good demand for this type of veneer in the domestic markets.
The implementation of GST is favourable for branded plywood manufacturers like Greenply, primarily because of the change in taxation from 28% to 18%. This move will therefore increase the market share of branded players. The plywood industry for organised players is estimated to grow at 25% CAGR over FY18-22.
Conclusion: The stock currently trades at 12x FY19E earnings and looks attractive based on its growth prospects. We have a Buy on the stock with a price target of Rs.200 (20x FY19E earnings) within a year. Investors can even hold the stock for 2-3 years for much higher returns.