Greenply Industries - Consistent Outperformance

Greenply Industries Ltd is a leading manufacturer of plywood and laminates with market share of 25% and 15% respectively in organized market. It is the largest manufacturer of laminates in India. The company has four manufacturing facilities (Uttrakhand, Nagaland, Kolkata and Rajasthan) with combined capacity of 18 mn sqmt of plywood, 2 mn sqmt of particles board, 2.1 mn sqmt of decorative veneers and 5.34 mn sheets of laminates. The company has largest capacity to produce particle boards in India.

 

Diversified Product portfolio: The Company has diversified product portfolio ranging from plywood, particle board, laminates, veneers, block boards to flush doors. This has enabled the company to de- risk its business model. Integrated Greenfield plant at Pantnagar commissioned: The Company has commissioned its integrated Greenfield plant in tax free zone of Uttarakhand at an investment of Rs18 crore to produce plywood and particle board. The state is having highest water level in India at mere 4 meters from ground level, with high soil fertility to facilitate agro-forestry resulting into a win-win for farmers and company. The company will benefit from income tax exemption for 5 years and excise duty exemption for 10 years. The company has also increased its laminates capacity from 3.96 mn sheets to 5.34 mn sheets at an investment of Rs40 crore.

 

Robust Sales and PAT growth in Q2FY08 : The company has reported 27 percent growth in sales to Rs136 crore and 135 percent growth in PAT to Rs 11.19 crore in Q2FY08. The operating margin has expanded by 846 bps to 17.64 percent as compared to 9.18 percent in Q1FY07 . The rupee appreciation against global currencies has reduced the cost of imported raw material as it is a net importer of raw materials like design paper, chemicals, timber etc.

 

Type	UnAudited	UnAudited	UnAudited	UnAudited	UnAudited
Period Ending	30-Sep-07	30-Jun-07	31-Mar-07	31-Dec-06	30-Sep-06
No Of Months	3	3	3	3	3
Description	Value(Rs. million)
Net Sales / Interest Earned / Operating Income	1,356.32	1,160.00	1,106.09	1,088.52	1,064.47
Other Income	22.96	17.32	1.83	0.14	4.03
Total Income	1,379.28	1,177.32	1,107.92	1,088.66	1,068.50
Expenditure	(1,140.07)	(992.05)	(974.11)	(945.17)	(970.82)
Operating Profit	239.21	185.27	133.81	143.49	97.68
Interest	(49.37 )	(42.50)	(28.96)	(39.06)	(22.66)
Profit Before Depreciation and Tax	189.84	142.77	104.85	104.43	75.02
Depreciation	(33.44 )	(28.67)	(26.86)	(23.79)	(18.83)
Profit before Tax	156.40	114.10	77.99	80.65	56.19
Tax	(44.53 )	(23.37)	(10.84)	(15.20)	(8.65)
Net Profit	111.86	90.72	67.15	65.45	47.54
Equity Capital	82.99	82.99	82.26	82.26	82.26
Basic And Diluted EPS after Extraordinary item	-	5.47	4.57	3.98	2.89
Basic EPS after Extraordinary items	6.74	-	-	-	-
Diluted EPS after Extraordinary items	6.58	-	-	-	-
Operating Profit Margin	17.64	15.97	12.10	13.18	9.18
Net Profit Margin	8.25	7.82	6.07	6.01	4.47

 

Positive industry outlook: According to ASSOCHAM the shortage of dwelling units in India is expected to touch 17.90 mn units by 2010. The incremental demand for office space in India is assessed to exceed 85 million sqft between 2005 and 2008. The built-up mall area is likely to increase from 32.6 million sq. ft. in 2005 to 150 million sqft in 2010. The above figures are well pitched for the company to drive the topline and bottomline.

 

Recent Developments:

1)       Company has declared the interim dividend of Rs 1.50 per share on equity shares of the Company for the financial year 2007-2008. Further, November 20, 2007 has been fixed as the Record Date for the purpose of payment of interim dividend.

2)       In order to meet its expansion targets, company has made the following announcements in the Board Meeting held on October 23, 2007 :

(a)     Acquisition of M/s. Galaxy Decor Pvt Ltd and M/s. Platinum Veneers Pvt Ltd both engaged in the business segment of manufacturing of Plywood and its allied products

(b)     Setting-up of MDF manufacturing line in its existing unit at Pantnagar, Uttarakhand

(c)     Setting-up of a new Laminate unit in Himachal Pradesh

 

Shareholding Pattern: As on September 30, 2007 Promoter Group holding is at 53.83% while MFs / FIIs / Bodies Corporate together hold 35.33% of shares.

 

Sr. No.	Top MF / FII / Bodies Corporate Holdings	% Holding
1	Aeneas Portfolio Company LP	14.14
2	Emerging Markets Management LLC A/C The Emmumb Rella Funds Emerging Markets South Asianstars Fund	4.33
3	Volrado Venture Partners	3.77
4	Payash Securities Pvt Ltd	2.11
5	Goldman Sachs Investment Mauritius I Ltd	2.23
6	JM Trustee Company Ltd A/c JM Mutual Fund - Basic	5.36
7	Sundaram BNP Paribas Mutual Fund A/c. Sundaram BNP Paribas Smile Fund	1.02
	Total	32.95

 

Valuations: At current market price of Rs 245, company is quoting at P/E of 12.13 basis 12 months trailing EPS. The company has been outperforming Sensex / Nifty consistently quarter on quarter.

 

Date	Nifty	Qtr Return	Greenply	Qtr Return
31-Dec-06	3,966		97.50
31-Mar-07	3,822	-3.7%	115.85	18.8%
30-Jun-07	4,318	13.0%	156.80	35.3%
30-Sep-07	5,021	16.3%	248.95	58.8%