Greenply Industries (GIL) registered strong top-line growth in 2Q FY 2012.
The company’s net sales grew by 43.1% yoy and 17.3% qoq to Rs.414 cr.
GIL reported a 1.1% yoy expansion in OPM to 8.9% mainly due to lower
administrative and selling expenses. OPM would have expanded further but the
company reported Forex loss of Rs.11 cr during the quarter.
Strong Growth...!
Net profit increased by 537% yoy to Rs. 10 cr. We believe GIL is well placed to benefit from its laminate
capacity expansion, improved utilization levels of the MDF plant and expansion in
the plywood segment. Hence, we maintain our Buy view on the stock.
Top line posts strong yoy growth: For 2Q FY 2012, GIL’s top line grew by 43.1%
yoy to Rs. 414 cr mainly due addition of the MDF segment and robust growth of
28.6% and 24.7% yoy in the plywood and laminate segments, respectively.
Going ahead, the company will hedge its forex exposure for the coming two quarters
and, thus, we expect forex loss to be minimal, which will result in better margin
and profitability.
Outlook
We believe concerns related to the MDF segment have
receded considerably. Hence, higher utilization 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 45% utilization rate in FY 2012.
Further, the company is well placed to benefit from its laminates capacity expansion,
which increased nearly two-folds in FY 2010 and is expected to achieve
100% utilization in FY 2012 & expansion of its plywood capacity by
3.75 mn sq. ft., which is expected to contribute around Rs.45 cr to FY 2012 top
line. At Rs. 204, the stock trades at 5.7x FY2013E earnings.
We maintain our Buy rating on the stock with a revised target price of Rs.284
Review by Angel Research
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