Greenply – “The Plywood and MDF Giant”

Greenply Industries Limited, with a whopping turnover of Rs.1656 crore for the FY 16, is the largest interior infrastructure company in India. The company is a leader in plywood and MDF Board and has 30% market share amongst the organized players in MDF and plywood segment.

The company is a preferred choice by a large number of office and home builders. Their product portfolio includes residential and commercial floor products, plywood & block boards, MDF and wood floors. Their products are marketed under the brand name Greenply Plywood, Green Club Ply, Ecotec, Green Panelmax, and Green Floormax.

The company has a pan India presence with 46 branches spread across 300 cities. The products of the company are distributed by 12,000 distributors, dealers, sub-dealers, and retailers. Around 98% of the total sales are routed through the dealers. The company has five manufacturing units, 4 for plywood and 1 for MDF. The MDF manufacturing unit is the largest in India with a capacity of 180000 cubic meters.

Result Analysis

The net sales of the company for Q1FY17 stood at Rs. 414.91 crores against Rs. 380.75 crore in the same quarter last year registering a growth of 9%. The top line growth has come on the back of a better performance by plywood business which grew by 7.7% on y-o-y basis while MDF business grew by 11.4% on y-o-y basis.

Operating profit saw a growth of 13.60% and stood at Rs. 49.84 crores for Q1FY17 against Rs. 43.87 crore in the same quarter last year.

PAT for Q1FY17 stood at Rs 34.11 crore against Rs. 26.70 crore in the same quarter last year, registering a growth of 27.75%.

Investment Rationale

• Implementation of GST to boost margins and realizations – The passing of the GST bill is expected to be favorable for Greenply and its peer companies mainly because of change in taxation structure. GST bill would bring down the advantage enjoyed by unorganized plywood players and change the ratio of organized to unorganized market share from the current ~25:75 in favor of organized players.
• High Disposable Income and rising residential and commercial construction will boost demand for the products of the company. Seventh Pay Commission has recommended an overall hike of 23.6%. This will benefit ~1.4 crore government employees and will lead to higher disposable income. Moreover rising number residential and commercial construction will also increase the demand for the products of the company.
• Healthcare & Hospitality segment in India is witnessing a robust demand growth which is beneficial for the company.
• Government’s focus on ‘housing for all’ by 2022, will help increase the demand for plywood. Increasing shift from unbranded to branded plywood is likely to benefit the branded players in a big way.
• With the Government’s vision on constructing 100 smart cities across India, the demand for plywood, MDF, and laminated flooring will grow.
• Capacity Expansion to cater to the rising acceptance and demand - The company has planned a Greenfield unit to manufacture MDF in Andhra Pradesh with a capacity of 3.6 lakh cubic meters, thereby increasing its current capacity of 1.8 lakh cubic meters by almost three times. The plant is expected to be commissioned by H1FY19.
• Largest manufacturer with strong brand penetration and robust distribution network – Greenply has Pan India presence with 46 branches spread over 300 cities with 30% market share in the organized plywood market as well an MDF market.
• The company is expanding the distribution network and has newly launched wallpaper business with increasing acceptance.
• Volume for Greenply is set to improve with the recent imposition of Anti-Dumping Duty on Imports from Indonesia and Vietnam.
• The company is focused on the brand building which, in turn, will enable them to maintain its market share.

Greenply share price is currently trading at Rs.265 and has made a 52 week high / low of 297.50 and 151.05 respectively.

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