This Plywood Manufacturer Stock Can Give Good Returns, Says Sharekhan

Brokerage firm Sharekhan is betting on the stock of Greenlam Industries to generate good returns. The company recently announced a major capacity expansion plan.

Expansion plan of Rs 950 crore

The company will undertake an expansion plan spread over 30 months towards setting up of its third laminates plant and foray into Plywood and Particle board business.

"Plywood and laminate capacities are expected to come on-stream by Q4FY2023, while the particleboard facility would begin operating by Q4FY2024. The capacity expansion would yield incremental revenue of Rs. 1500 crore per annum on full utilisation, which would aid the company in tripling revenues by FY2026. The capex would be undertaken with leverage in check, which is expected to peak at 0.8x. The planned capacity expansions would place Greenlam among the top three players in Plywood and attain leadership position in the particleboard segment," Sharekhan has said in its report.

Sharp increase in revenues

According to the brokerage firm, Greenlam Industries Eyeing three-fold rise in revenues by FY2026.

"Greenlam estimates to generate Rs. 2000-2100 crore revenues from its existing business while new businesses will add Rs. 1500 crore (laminates - Rs. 500 crore, Plywood-Rs. 400 crore, Particle board-Rs. 600 crore), aggregating to Rs. 3500-3600 crore revenues by FY2026 from Rs. 1200 crore in FY2021," the brokerage has said.

Top 3 plywood manufacturers

Greenlam, with its dominant industry position in laminates is expected to be among top three players in Plywood and leader in Particle board.

"The company is expected to gain market share from unorganised segment in Plywood and particleboard segments domestically, while it is expected to benefit from rising export opportunities in exports. Greenlam is currently trading at a P/E of 26x its FY2024E earnings, which we believe provides further room for upside, considering 24% net earnings CAGR over FY2021-FY2024E. Hence, we retain our Buy rating with revised price target of Rs. 2,127," Sharekhan has noted in its report.

Share of Greenlam Industries last closed at Rs 1787.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. 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.