Gain 41% Aggressive Return In 1 Yr, Small-cap Company's Revenue Up 73.9% YoY, Buy Stock: ICICI Securities

Renowned brokerage firm ICICI Securities suggests investors buying the stocks of Greenply Industries. The company reported consolidated revenue growth of 73.9% YoY, with standalone India operations growth of 85% YoY, on a low Covid-affected base. With a low market price, it is an affordable stock for investors.

Stock To Buy: Target Price & Financial Result

The Current Market Price (CMP) of Greenply Industries is Rs. 180. ICICI Securities has estimated a Target Price for the stock at Rs. 254. This stock has the potential to give a 41.1% return, in the upcoming 1 year. This is a small-cap stock with a market capitalization of around Rs. 2,236 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 180
Target Price	Rs. 254
Potential 1 year return	41.10%
52 week high share price	Rs. 254.70
52 week low share price	Rs. 161.35

Its subsidiaries' revenue growth of 24.3% YoY. The company's consolidated operating margin expanded by 377bps YoY to 8.8% due to operating leverage. Its standalone India plywood business grew at 85% YoY, aided by volume growth of 79% YoY due to a low base.

ICICI Securities: Advantages Of The Stock

According to the brokerage firm, "Greenply's operational results have been lower than estimates, hence we cut our PAT estimates for FY23E/FY24E by ~3% each year. It has maintained its guidance of ~100bps increase in operating margin in FY23 over FY22. MDF capacity expansion is on track and likely to commence production from Mar'23. We continue to prefer Greenpanel Industries and Century Ply-board in the wood panel sector over Greenply. Maintain buy due to inexpensive valuations (15.5x FY24E P/E) and sector tailwinds. The company has taken price increase of ~2% in Jun'22 and plans further price action in Q2FY23, which shall enable margins to improve from Q3FY23 onward. Management has maintained its guidance of ~100bps improvement in India business margins in FY23 over FY22."

The civil construction at MDF plant in Gujarat is on track, but facing some delay in delivery of machinery due to international logistics issues. This plant is expected to commence trial production in Q4FY23 and commercial production in Q1FY24, which is expected to run at 40-50% utilisation in its 1st year of operations and optimum utilisation during its 3rd year.

Company portfolio: Greenply Industries

Greenply Industries is one of India's top plywood brands. They manufacture moisture-resistant plywood to fire-retardant ones. The company's demand in Europe and South-East Asia was robust in Q1FY23 and management expects Gabon operations to continue at similar run-rate of Q1FY23 for the remaining 9MFY23. The company took a price hike of ~2% in Q1FY23 and is likely to take another price hike in Sep'22 in the value segment of plywood. The company's management stated demand was healthy and is expected to remain so going ahead too. It has reiterated its guidance of >15% revenue growth in the India plywood business. Operating margins should improve from Q3 as per management with the benefit of price hikes taken in H1FY23 and raw material price stabilization.

Disclaimer

The above stock was picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.