ICICI Securities

Greenply Industries (Buy)

CMP: ₹163.2

Target: ₹219

Business strategy remains four-pronged: i) offer quality products, ii) build a strong parent brand, iii) enhance distribution network, and iv) reduce cost and become the most efficient player in the industry.

Company is likely to maintain its adspend at 4% of net sales in FY20.

The management of Greenply Industries at its recently concluded analyst meet reiterated: i) 8-10 per cent revenue growth guidance for FY20; ii) EBITDA margin improvement with higher sales of Gabon face veneers; iii) focus on asset-light approach with incremental outsourcing in premium and trading products; and iv) stricter discipline in working capital. Management also shared its long-term goal of 12-14 per cent revenue growth, 30 per cent pre-tax RoCE and clearing its entire long-term debt over the next 3-4 years. Improving sales in decorative veneer segment and opening up of exports of Okoume face veneers from Gabon to the EU region would enable MTLM to report double-digit growth and firm margins. This would be despite the subdued volumes in plywood segment in FY20. Maintain ‘buy’ with an unchanged target price of ₹219.

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