PL Stock Report - Greenpanel Industries (GREENP IN) - Q1FY24 Result Update - Result below est. while maintain MDF realisation - BUY

Greenpanel Industries (GREENP IN) - Praveen Sahay - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: BUY | CMP: Rs341 | TP: Rs459

Q1FY24 Result Update - Result below est. while maintain MDF realisation

Greenpanel (GREENP) maintained its MDF volume growth guidance between 12-15% with MDF EBITDA margin between 23-25% for FY24, even after 7.4% decline in MDF volume in Q1FY24 (considering strong traction in volume in H2FY24). Plywood is also expected to deliver 10% volume growth in FY24 despite severe fall (-37.1% YoY on higher base) in Q1FY24. Consolidated EBITDA margin contracted to 17% with oneoff expenses like 1) maintenance shutdown of MDF plant, 2) increase in logistics exp. 3) higher adv. & promotion expenses, while excluding oneoff EBITDA margin was ~20% in Q1FY24. Higher timber prices continue to impact margins in coming quarters while management remains confident of compensating it with higher volume growth.

We are maintaining our positive view considering 12.7% MDF volume growth and 22.1% EBITDA margin in MDF segment (MDF contributes ~86% rev.) in FY24. We estimate FY23-25E Revenue/EBITDA/PAT CAGR of 8.9%/2.8%/0.7%, with MDF volume CAGR of 17.4% and EBITDA per CBM of around Rs 6,060 in FY25. The company is well-positioned for growth and value creation given its 1) leading position in domestic MDF segment, 2) strong growth prospects in domestic MDF demand, 3) planned capacity increase of 35% over FY23-25 and 4) extensive distribution network. We have tweaked our FY24/FY25 earnings to adjust oneoff expenses in Q1FY24 and adoption of new tax regime by GREENP. We value the stock at 21x FY25 EPS and arrive at TP of Rs459 (Rs 455 earlier). Maintain ‘BUY’ rating.

Revenues decline by 16.8%, Adj. PAT decline 51.9%: Rev. down 16.8% YoY to ~Rs3.9bn (PLe: Rs4.7bn). MDF segment declined 13.2% YoY to Rs3.4bn. MDF volume decline by 7.4% YoY and reported blended realization of Rs 29376/CBM (down 6.3% YoY) and domestic realization was Rs 32,925/CBM (down 1.3% YoY). Plywood segment reported a revenue of Rs450mn down 36.5% YoY. Plywood volume decline by 37% YoY and reported realization was Rs285/sqm (down 1% YoY). EBITDA decline by 50% YoY to Rs658mn (PLe: Rs963mn). EBITDA margin was at 17% (PLe: 20.4%). In MDF segment, EBITDA margin declined to 20.4% mainly due to maintenance shutdown of Rudrapur plant, higher brand spends of Rs149mn and increase in wood prices. PBT decline by 57.6% YoY to Rs500mn (PLe: Rs789mn). PAT decline by 51.9% YoY to Rs373mn (PLe: Rs584mn).

Concall highlights: 1) MDF volumes was impacted in Q1FY24 due to maintenance shutdown of Rudrapur plant for 19 days during April. 2) MDF EBITDA margin impacted by a) maintenance shutdown (cost Rs7cr), b) higher brand spends (3.9%rev.), c) increase in timber prices. 3) Timber prices rose by 2% QoQ for north plant & 3% for south plant in Q1FY24. Currently, prices remain stable in north but have increased by 10% in south plant. 4) Resin prices declined by 2-3% QoQ in Q1FY24 & further by 10% in Q2FY24, compensating hike in timber prices. 5) Logistics exp. %rev. increase to 5.5% from 4.6% due to shutdown of plant at north compensated with other location. 6) Mgmt expects 12-15% MDF volume growth, 23-25% EBITDA margin. 7) Planned capex of Rs 6bn, funded through internal accrual & borrowing of Rs 2.6bn. 8) OEM contributes 10-12% domestic MDF vol. expected to increase ~20% in near term. 9) MDF domestic/export volume contributes 76%/24% in Q1FY24. 10) VAP contributes 54% of dom. MDF, expected to reach 65% in near term. 11) Thin MDF constitutes 35-40% of the domestic MDF market.

(Click on the Link for Detailed Report)