Greenply Industries Ltd. share price target

OINL: Gloomy outlook cut to REDUCE. Weekly Wrap: COVID spike worries markets. Greenply Ind: Lockdown saps Q4 performance. CPBI: Core business declines but MDF, laminates prop up margins

Key takeaways from our roadshow with the management of Greenply Industries (GIL).

Greenply Industries' (GIL) consolidated Q3FY20 revenue slipped 1% YoY, coming in below estimates.

In the plywood business, GIL's market share was at 26% of the | 4,500 crore organised plywood market (total plywood industry size: ~| 19,000 crore) with a pan-India network of 1,870 distributors/stockists, 6,000 retailers serviced by 27 branches. Currently, its product portfolio consists of 64%, 36% premium, mid-to-low segment plywood in volume terms (72%, 28% in value terms), respectively. To gain market share by increasing presence in the mid-to-low segment, GIL had earlier launched plywood under Bharosa & Jansathi brands. Going ahead, the management is aiming at premium, mid...

MTLM: India business steady; Gabon to lend growth impetus. IT Services: Positive readthrough from Accenture results. Infrastructure: NHAI call takeaways Order awards to gather pace from Q3

In our recent meeting, Greenply Industries' (GIL) management outlined the following targets for FY20: (1) India plywood business to grow 8-10% despite a challenging market, (2) India operating margins to expand 100-150bps to 10.5-11%, and (3) Gabon operations to ramp up substantially to ~Rs 2bn in revenues (+60% YoY) with ~18% (+200bps) operating margins.

Aims to achieve further growth through outsourcing Plywood sales volumes grew 4.1% YoY to 13.57 MSM (premium category contributed 64%) in Q1FY20 while realisations improved 3.3% YoY to | 222/sq mt. GIL's own manufacturing facility is operating at 139% utilisation as of Q1FY20. With capacity constraints in place, it plans to achieve further growth via outsourcing. It has already entered into a JV (30% ownership) for premium-end products (11 MSM plant capacity) that is expected to commence production by Q3FY20E & could ensure revenue worth | 100115 crore at peak utilisation for GIL. It is also planning to enter another JV...

Greenply Industries (GIL) reported consolidated Q1FY20 revenue growth of 13%, with India plywood operations growing at 6.2% YoY.

Business outlook improving; demerger could boost valuations Greenply Industries (GIL) continues to see improving traction in plywood sales, clocking high single-digit growth in Q1FY20, per our channel checks. MDF too has seen traction in Q1 and prices here have stabilised. GIL is trading at attractive valuations and could command higher multiples post demerger MDF business (record date set for 15 Jul), as plywood carries a stronger ROCE and growth profile, especially with the ongoing ramp-up in Gabon operations....

Strong volume growth in plywood division in FY19 Plywood business revenues grew 26.7% YoY to | 380.8 crore driven by 23.9% volume growth at 17.2 million sq mt (MSM) while average realisation grew 1.4% YoY to | 220 /sq meter in Q4FY19. Despite plywood industry growing <5% YoY, GIL's plywood sales grew 19.6% YoY to | 1,372 crore in FY19. This was primarily on account of strong sales volume growth of 19.5% YoY to 61.0 MSM in FY19. Higher sales volume was as GIL got incremental market share on account of gain in market share due to stricter...