Greenply Industries Reports A Slowdown In Revenues

Greenply Industries reported its Q1FY14 result yesterday (July 23, 2013). The company reported 12% growth in revenues to Rs 480 crore. Its net profit was up by 25% to Rs 22 crore. The numbers nevertheless are below market expectations and hence its stock tanked. The scrip is down 2% for the last two trading sessions.

During the quarter, the company has reported 13% growth in the Plywood and Allied products. The Laminates business has reported 14% growth while its MDF business has reported 4% growth. The CFO of the company said that the general slowdown in the economy has put pressure on the business. He also confirmed that there is a demand pressure on each segment. The PBIT margins of Plywood and Allied products business have shown some improvement on a YoY basis. The laminates business, on the other hand, has shown a decline of about 75 basis points in the PBIT margins. Despite the flat revenues, the MDF business has shown expansion of over 200 basis points. Overall, the EBITDA margins of the company stood at 11.78% showing a marginal improvement on a YoY basis.

The company has said that the planned capacity additions in Rajasthan, Andhra Pradesh and Uttarakhand would carry on as planned as it expects to launch a new line of products. Besides, it is also looking at backward integration and is therefore setting up a capacity in Myanmar. It has guided 12-13% growth in the topline in the current fiscal with the margins sustaining the last year's level. The company has guided lower other income.

Based on the numbers reported and further talks with the management, we reduce our earlier price target from Rs 520 per share to Rs 510 per share. We recommend that investors hold the stock at the moment.