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Buy This Consumer Durable Multibagger Stock For A Target Price of Rs. 700: Sharekhan

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Greenpanel is India's largest wood panel maker having Medium Density Fibreboard (MDF), Plywood, Decorative Veneers, Flooring, and Doors manufactured at the company's production operations in Uttarakhand and Andhra Pradesh. This small-cap stock has given a multibagger return of 131.76% in 1 year and after the company's strong Q4FY2022 performance, the brokerage firm Sharekhan has placed a buy call on the stock for a target price of Rs. 700.

 

Q4FY2022 result

Q4FY2022 result

The brokerage has said in its latest report that "Greenpanel Industries Limited (Greenpanel) reported saw net earnings strongly beat estimates in Q4FY2022 led by better-than-expected operating margins in the MDF division. Consolidated revenues grew by 20.9% y-o-y to Rs. 470 crore led by a 45% y-o-y jump in MDF realisations while MDF volumes declined by 10.7% y-o-y (impact of COVID-19, election in some states and price rise). Plywood volumes declined by 19.3% y-o-y, while realisations improved by 5.6% y-o-y."

According to Sharekhan, the company's "Consolidated OPM at 29.3% (up 437 bps y-o-y, up 314bps q-o-q) was aided by MDF division's OPM (34.6% Vs 28.6%/30.5% in Q4FY2021/ Q3FY2022) on account of pricing actions (17% price increase cumulatively during FY2022) and product mix (lower share of OEM sales). Consolidated operating profit/net profit was up 42.1%/42.8% y-o-y. The management expects MDF and plywood volumes to grow at 15-18% y-o-y and 6-8% with OPM levels for both segments to sustain in FY2023. It would announce capacity expansion plans by May-June 2022 which is likely to be brownfield expansion at its Andhra Pradesh plant."

Buy for a target price of Rs. 700
 

Buy for a target price of Rs. 700

The brokerage has claimed that "Greenpanel has strong structural growth drivers and a favourable demand environment led by weak imports owing to multiple issues. Strong demand helped company pass on a steep rise in raw material costs, which along with product mix has led to margin expansion in the MDF division. The company's brownfield expansion and another anticipated round of capacity expansions would lead to healthy growth going forward. The company's strong operating cash flow generation, tight working capital management and reducing leverage would propel its return ratios over FY2022-FY2024E. The stock trades at a P/E of 17x its FY2024E earnings, which we believe leaves room for upside considering over 30% CAGR in net earnings expected over FY2022-FY2024E. Hence, we retain a Buy rating with a revised price target (PT) of Rs. 700 led by an upward revision in estimates."

Weak macroeconomic environment leading to a lull in industry growth trend remains the key risk for the stock according to Sharekhan.

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. 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. Goodreturns.in advises users to check with certified experts before taking any investment decisions.

Read more about: stocks to buy
Story first published: Monday, May 9, 2022, 16:31 [IST]
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