Green­ply In­dus­tries Ltd

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(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.

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