Green Ply Net Doubles

Greenply came with a fantastic Q4 reports today (29th May 2013). The company reported 18% rise in its top line to Rs 540 crore. Its net profit came in at 35 crore with a handsome growth of 115%. The company also has approved an expansion of its existing manufacturing unit at Behror, Rajasthan to manufacture high end Veneered Engineering Flooring and Pre-laminated Particle board. The stock is likely to react positively going ahead.

During the quarter the company has reported 21.6% growth in the revenues from 'Plywood and Allied products' which is its largest business segment bringing 48% of its total revenues. The PBIT margins of this business are at 13.65% showing a rise of more than 300 basis points on seqenential basis and have doubled from that in Q4FY12. Similarly revenues from its second business segment 'Laminates' have rose by 11% but the margins are little under pressure. Its new business segment 'MDF' has also reported 20% growth and PBIT margins of this business are at 17% showing a growth of more than 100 basis points.

On the cost front, its material cost has increased by 19% while employee cost has rose by 20% on YoY basis. The material cost as per cent of sales however has declined by 50 basis points. Overall its EBITDA margins are at 12.80% against 10.58% a year ago.

Finance cost during the quarter has declined by 30% to Rs 14 crore. Tax expenses too have declined as its tax rate for the quarter was at 20%. Due to the superior operating performance its interest cover ratio has substantially improved from 2x to 4x in one year period. In fact overall trend has been the improvement in the interest cover ratio in last five quarters.

On the valuation front, the stock at the TTM EPS of 47.3x is available at the Price to earning multiple 9.5x. We believe that the company has shown a superior performance and the same is likely to continue. We set a a price target of Rs 520 based on our estimate which will give a 20% capital appreciation on the CMP.