This Small Cap Stock Could Be a “Dark Horse”, Stock Could Jump 61%

Broking firm Anand Rathi has recommended buying the stock of Greenply Industries as the stock could be a potential dark horse and valuations remain attractive.

According to Anand Rathi, healthy plywood growth and greater MDF utilisation would drive Greenply's domestic performance. The brokerage also believes that expected input-cost easing would expand margins.

Plywood division seeing decent growth, will sustain profitability

Trading and its asset-light model provides Greenply flexibility to raise volumes on mounting demand. "The Sandila (UP) manufacturing plant (13.5m sq.mtr) commissioned in Q1 FY23 is near optimum utilisation and commissioning of the 7.5m sq.mtr. capacity at Hapur, UP (a partner facility) is expected soon (Mar'23). An 11.4% volume CAGR expected over FY22-25. Prices of chemicals have declined, and high timber prices have started to cool. Hence, margins are expected swing up," the brokerage has said.

According to the Anand Rathi report, high-growth medium-density fibre-board is likely to begin operations, margins have moderated. "MDF capacity (240,000 cu.mtrs) at Vadodara is expected to begin by Q1 FY24. Robust demand led to domestic manufacturers scaling up capacities, besides increasing imports. This led to margins steeply sliding from highs of 30-32%; 23-25% however, seems sustainable," the brokerage has said.

Stock of Greenply Industries trades at attractive valuation; potentially a dark horse

Considering 9M FY23 performance, we lower FY23e/FY24e/FY25e earnings 10%/20%/12%. 21%/26% revenue/earnings CAGRs over FY22-25 anticipated. "We believe the stock could be a dark horse: it trades at attractive valuations (much lower than peers). We, thus, retain our Buy, at a lower target price of Rs 230 (15x FY25e earnings), earlier Rs. 262 on 15x FY25e earnings," the brokerage has said.

The stock of Greenply Industries has climbed to a 52-week high of Rs 232 in April of last year and has since fallen. The shares have also hit a 52-week low of Rs 134.50 on Feb 6, 2023.

Disclaimer

The buy calls on the stock is taken from the brokerage report of Anand Rathi of March 15, 2023. The article should be treated as informational and not an advisory to invest. Neither the author, nor Greynium Information Technologies Pvt Ltd nor the brokerage house, should be held responsible for decisions based on this article.