Small-Cap Plywood Stock Zooms Up 90.8% In 3-Years As Board Approves Dividend, Gets A Buy Rating

Greenply Industries' stock price has zoomed up by 90.8% over three years and jumped by 3.81% on an intraday basis to Rs 162.25 per share in Thursday's trade. Greenply Industries is a small-cap company that operates in the building materials segment whose core revenue is generated from plywood and laminates for home furnishing.

On May 30, 2023, the company announced a 50% dividend along with its steady performance for the fourth quarter. Based on its profit numbers and future estimates, a leading stock broking firm, ICICI Securities has suggested investors to buy shares as the stock can fetch a return of up to 41.10%.

Q4 Performance

Greenply Industries reported consolidated revenue growth of 4.6% YoY (4-year CAGR 4.6%) in Q4FY23, with India plywood business (including Sandila subsidiary) growing at 3.1% YoY while plywood volumes were flat YoY (4-year CAGR of 2.2%).

Consolidated operating margins expanded 21bps YoY to 10.1%, as India plywood operating margins were up 103bps YoY (adjusting for ESOP expenses) due to lower A&P costs. Margins for Gabon operations declined by 10.8ppt YoY (due to high raw material costs as Gabon's gross margins fell 22.7ppt YoY). These factors resulted in EBITDA/PBT growth of 6.8%/1.6% YoY.

Guidance

As per the ICICI Securities research note, the management indicated that plywood demand remains slightly subdued with the mass segment seeing higher growth than the premium market. Gabon operations are showing signs of improvement QoQ in Q1FY24 with some revival seen in the European market.

Further, it was mentioned that the management has guided for 10-12% YoY India plywood volume growth in FY24 driven by the continued uptick in the real estate sector and shift in consumer preference for organised players.

At the same time, it was pointed out in the note that the working capital days increased by 6 days YoY to 52 in Q4FY23, primarily due to lower payable days. Net debt increased by ~Rs4.1bn YoY in FY23 to ~Rs6.3bn (due to borrowing for MDF capex).

Valuation & Rating

ICICI Securities, in its research note, has mentioned that Greenply Industries' operational result in Q4FY23 was marginally better than the estimates. "However, the company faces near-term headwinds in the plywood segment due to cost pressures whereas in the MDF segment, it faces demand challenges due to increased imports and new capacities coming up in the domestic market." the note said.

Additionally, the stock-broking firm suggests, "We cut our PAT estimates for FY24E/FY25E by ~3%. Maintain BUY on inexpensive valuations with a revised Mar'24 target price of Rs229 (earlier: Rs236)."

Dividend Details

The Board of Directors of the small-cap company has approved a dividend of 0.50 per equity share of Re 1 each for the financial year ending 31st March 2023. The company will pay the dividend within 10 days of its approval by the shareholders of the company at its forthcoming annual general meeting scheduled to be held on September 20, 2023.

The company has not shared a record date or book closure dates to note the names appearing as beneficial owners to receive dividends.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the author, or the brokerage house will not be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.