CMP:
Rs. 1001.90; Buy at current levels & at dips.
Short Term Target: Rs. 1050.00; Medium to Long term Target: Rs. 1100; STOP LOSS – Rs. 920.00; Market
Cap: Rs. 2,418.22 Cr; 52 Week High/Low: Rs. 1040.00 / Rs. 301.00
Total
Shares: 2,41,36,374 shares; Promoters : 1,32,75,000 shares – 55.00 %; Total
Public holding : 1,08,61,374 shares – 55.00 %; Book Value: Rs. 241.60; Face Value: Rs. 5.00; EPS: Rs.
50.60; Dividend: 60.00 % ; P/E: 19.80 times; Ind. P/E: 24.90;
EV/EBITDA: 10.75.
Total
Debt: 549.50 Cr; Enterprise Value: Rs. 2,964.390 Cr.
GREENPLY INDUSTRIES
LIMITED: Greenply Industries Ltd was established
on August 9, 1984 and incorporated in 1990 and is based in Kolkata, India. The
company was earlier known as Mittal Laminates Private Ltd and changed to Greeply
Industries Ltd in 1995. The company came out
with an IPO of about 10 lakh shares in April 1995 at par. The company,
in May 2005, declared split in its face value from Rs. 10 to Rs. 5. Greenply Industries Limited, an interior
infrastructure company, manufactures, markets, and distributes plywood,
laminates, particleboards, and allied products primarily in India. Its interior
infrastructure products include decorative veneers and laminates, plywood,
block boards, flush doors, medium density fiberboards, and restroom cubicles,
laminated flooring and UV coated panels, and others. The company offers its
products under the Greenlam, Greenply Plywood, Green Club Premium Ply, Greenlam
Laminates, Green Decowood, Ecotec, and Green Panelmax brand names. The Company’s
flagship decorative laminate brand is very well known ‘Greenply,’ is exported
to more than 50 countries. Currently, Greenply has become the largest laminate
company in Asia and the fifth largest globally in terms of capacity. The
Company has 7 manufacturing facilities located across India at Tizit
(Nagaland), Kriparampur (West Bengal), Nalagarh (Himachal Pradesh) and 2 units
at Pantnagar (Uttarakhand). Company has 46 marketing offices and a network of
approximately 15,000 distributors, dealers, sub-dealers, and retailers. Greenply
Industries Limited also exports its products to North America, Latin America,
Europe, the Middle East, and the Asia Pacific. Greenply Industries Ltd. Greenply Industries Limited is locally compared
with Centryply Ltd, Archidply Industries Ltd, Uniply Industries, Mangalam Timber Products ltd, Novopan Industries Ltd, Mayur ply Industries Ltd, Sarda Plywood Industries and globally compared with Boise
Cascade Company USA, Deltic Timber Corporation of Arkansas, Louisiana-Pacific
Corporation from Tennessee, Seven Industries Co., Ltd of Japan, Nankai Plywood
Co., Ltd of Japan, Eksons Corporation Berhad of Malaysia, UPM-Kymmene Oyji from
Finland, Stora Enso Oyj-R shs of Finland, Munksjo Oyj of Sweden, Ence Energia y
Celulsa S.A of Spain, Shandong Chenming Holding of China, Nine Dragons Holdings
of China, Indah Kait Pulp & Pare Tbk of Indonesia, Sappi Limited of South
Africa.
Investment Rationale:
Greenply Industries
Ltd is the leading plywood manufacturer in India. It has more than 46 marketing
offices across all state capitals and major cities of India. It has a strong network
of more than 15,000 distributors, dealers, sub-dealers and retailers. The
Company holds almost 30 % market share in India’s organized plywood market and
around 18 % of India’s organized laminates market. Greenply Industries Ltd has
started commercial production of 'laminated wooden flooring' at the Company's
existing MDF Unit at Pantnagar situated in Uttarakhand. India is one of the
largest markets globally for different types of furniture. It is estimated that
the furniture market in India is likely to witness a CAGR of about 30 % over
the next three years. In fact, an independent industry research institute and
consulting firm, CSIL Milano has classified India as one of the 14 largest furniture
markets in the world. This is due to the rising purchasing power of the more
than 40 Cr strong middle-class segment. India’s organised furniture industry is
estimated at around US$ 800 Cr and is expected to grow at a CAGR of about 25 %
to 30 % annually. The modular furniture market in India was estimated to be
about US$ 16 Cr by the Index Media Consulting report. The size of the
international range of premium furniture was estimated at about US$ 2 Cr and
largely serviced by foreign players and imports. Furniture consumption in India
recorded about 10 % average annual growth over the last decade, reaching about
US$ 15 billion in 2013 at retail prices. India’s organised furniture sector is
marked by about 5,000 companies and nearly 10,500 importers. India imports are around
US$ 15 Cr worth of furniture, catering primarily to urban affluent households.
India’s interior decor industry is heading towards high-end, low maintenance,
quickly installable and customisable products. Branded furniture accounts for a
30 % market share in India. Recently, IKEA announced its intentions of
investing Rs.10,500 Cr (1.2 billion euro) following the recent policy change,
which permitted 100 % foreign direct investment (FDI) in single-brand retail,
which can potentially widen this sector. India’s median age of 24 make India a young
country with a large productive workforce. India’s per capital income was
projected to increase 10.4 % to Rs. 74,920 in 2013-14 as the country becomes a $1.7
trillion economy, driving consumption in the country. India has the highest
urban population rate of change among BRIC nations. The country’s urban
population accounted for 31.6 % of its total population. By 2015, the country’s
urban population is expected to grow 2.5 % above the 1.3 % growth in the total
population. At this rate, it is estimated that around 84.3 Cr people will live in
Indian cities by 2050, offering growing opportunities for its real estate and furniture
sector. The Indian office furniture segment is estimated at around US$ 1.6
billion, with 40% of that is generated through the provision for desks. The
modular furniture market in India, estimated to be about Rs. 800 crore, and is
dominated by bigger players. The market size of the international range of premium
furniture is estimated to be worth about Rs. 100 crore, and is primarily
catered to by foreign players. It is expected to grow at the rate of 10-15 %
over the next three or four years driven by demand from modern work spaces. The
Indian interior infrastructure sector is growing at a CAGR of 5-7 %. The
plywood and laminates is a highly fragmented industry. The share of the
unorganized sector is about 78 % in plywood and about 45 % in laminates. The
growth registered by organised sector is 15-20 %, in comparison to overall
industry growth of 5 %, indicates a shift of customer preferences from
unbranded to branded goods. India’s wood panel market grew at a CAGR of 6-8 % over
FY08-FY12 in volume terms. Currently, 30-35 % of the MDF demand is met through imports.
It is expected to grow in line with growth of wood panel market. Organised
players have increased their presence on account of rising aspirations and
brand consciousness.
Outlook and Valuation:
Greenply Industries Ltd is a leader in the manufacturing and marketing
of a wide range of interior infrastructure products. India’s rapidly expanding
economy is seeing growing affluence, both in urban and rural areas. The
tremendous penetration of the mass media has also resulted in millions of
middle-class Indians aspiring for more lavish lifestyles. Furniture-makers are
catering to the unmet urban middle-class need for stylish homes in compact apartments.
With the Indian economy and the real estate sector continuing to grow at a
phenomenal pace, demand for office and home furniture is expected to expand
even further. The entry of a number of international players and the rapid
emergence of domestic brands is transforming the industry, offering Indian
consumer a wide range of home and office furniture to choose from. The
furniture industry market size is expected to touch Rs. 12,000 crore by 2015. Greenply
being leading this sector is a clear winner and beneficiary with this mid class
boom. On financial side, Greenlam Exports business has grown at a CAGR of 24 %
over last 5 years. 47 % business contribution of laminates comes from international
market, making Greenply the largest exporter of decorative laminates from India
and that also for last four consecutive years. Company’s Exports grew by 23.57 %
in laminates business of Rs. 315.87 crores and contributed 14.64 % of the net revenue
for the year 2014. Exports contribute 48 % and 47 % respectively in volume
& value terms to the laminates business. The company Commenced production
of Laminated Flooring and launched its new products to expand its presence in
the economic plywood segment which is valued at more than Rs 12,0000 Cr.
Company’s Green Panelmax Plain, Pre-Laminated and Veneered Medium Density
Fibreboards (MDF) Boards are approved for use in defence works by the Military Engineering
Services is added advantage to the company. Greenply Industries Ltd’s Laminates
Segment has increased its production to 10.76 mn sheets in FY 2014 from 10.37
mn sheets in FY 2013 and has achieved capacity utilisation of 104 %. Company recently incorporated Greenply Industries (Myanmar) Pvt. Ltd. as a wholly-owned subsidiary for
setting up of a Veneer or Veneer-cum-Plywood Unit in Myanmar. Greenply
Industries (Myanmar) Pvt. Ltd has obtained approval of the Myanmar investment
commission to set up the unit and has completed commissioning of Veneering Line
and has started trial Production of Commercial Veneers. Additionally, Greenply
is venturing into Lumber business (Teak Sawn Timber in FY 2015) and Plywood (FY
2016). On Financial side, Company’s Revenue for the quarter rose by 7.55 % to
Rs. 517.08 Cr. The company’s net profit jumped to Rs. 30.22 Cr in 1st quarter
of FY 2014-15 as against Rs. 22.56 Cr in the corresponding quarter ending of previous
year, an increase of 33.95 %. Profit before interest, depreciation and tax is
Rs. 68.87 Cr as against Rs. 58.43 Cr in the corresponding period of the
previous year. With the proven track record it is expected that Greenply’s net
sales and PAT can post a growth of 9 % each CAGR over 2013 to 2016E respectively.
At the current market price of Rs. 1001.90, the stock is trading at its all-time high P/E of 18.10x FY15E, 16.23x FY16E. The company can post EPS of Rs. 55.34 for FY15E and Rs. 61.53 for FY16E. One can buy GREENPLY INDUSTRIES LIMITED with a target price of Rs. 1100.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 1050.00.
| KEY FINANCIALS | FY13 | FY14 | FY15E | FY16E |
|---|---|---|---|---|
| SALES (₹ Crs) | 2,000.81 | 2,159.51 | 2,365.75 | 2,578.67 |
| NET PROFIT (₹ Cr) | 114.16 | 114.46 | 133.56 | 148.50 |
| EPS (₹) | 47.30 | 47.43 | 55.34 | 61.53 |
| PE (x) | 18.38 | 18.33 | 15.71 | 14.13 |
| P/BV (x) | 4.40 | 3.60 | 2.96 | 2.52 |
| EV/EBITDA (x) | 10.16 | 9.88 | 8.90 | 8.07 |
| ROE (%) | 23.94 | 19.64 | 18.85 | 17.81 |
| ROCE (%) | 29.33 | 28.93 | 28.80 | 28.88 |
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