Edelweiss - Greenply Industries - upgrading our FY08E estmiates - Maintain Buy

[Sunil]

Greenply Industries (CMP INR 115, Market cap INR 1.8 bn, Maintain Buy)

 

We had a word with the management of Greenply Industries Ltd (GIL) post which we are upgrading our numbers for FY08E.

 

Key reasons for upgrading our estimates

 

§          Increase in realisations: The company has achieved better than anticipated realisations for its products during the 9M07 post which we have increased realisations as under :

 

 

 

§          Carbon Credits – GIL has received 17,000 carbon credits (CERs) for its unit at Rajasthan whereas the Uttaranchal unit is undergoing the validation process. Hence, we expect GIL to receive INR 20 mn in carbon credit in FY08E and INR 30 mn in FY09E. The carbon credit contract is valid till 2012.

 

§          Budget Impact – As per the union budget, the excise duty on plywood has been reduced from 16% to 8% which contributes 42% of GIL revenues in FY08E.We have hence reduced our excise duty by 0.5% in FY08E as the duty on other products would remain unchanged. Hence, the excise duty cut, coupled with changes in custom duty on chemicals and reduction in CST would result in savings of INR 66 mn p.a in FY08E.  

 

§          Capacity Expansion – GIL has announced to increase its Laminates capacity at Behror (Rajasthan) by 35% to 5.34 mn sheets per annum, which would be at the cost of INR 300 mn and would come on stream by Q208E and revenues from the same would start accruing by Q308E onwards. The laminates division can function at 110% utilisation levels! Also, the Uttaranchal plant would be running at ~90% capacity from Q208E and revenues for the same would start accruing from Q308E onwards. Further particle board unit at Uttaranchal would be functioning at ~70% (as against current utilisation of ~40%) from Q407E onwards. We have incorporated the same in our estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                           

 

Key Highlights

 

• Net Sales for FY07E revised upwards by 2.8% from INR 3.8 mn to INR 3.9 bn and for FY08E revised upwards by 9.4% from INR 4.6 bn to INR 5.01 bn primarily on account of new capacities coming on stream and better than anticipated realisations.

 

• EBITDA for FY07E revised upwards by 19.5% from INR 358 mn to INR 428 mn and for FY08E upwards by 22.2% from INR 570 mn to INR 697 mn with EBTIDA margins at 10.8% for FY07E against our earlier estimate of 9.3% and for FY08E at 13.8% against our earlier estimate of 12.3% primarily because of enhanced realisations, reduction in duties on raw materials and change in product mix.

 

• PAT for FY07E revised upwards by 26.5% from INR 181 mn to INR 229 mn and for FY08E from INR 283 mn to INR 436 mn by 54% with PAT margins for FY07E at 5.7% against our earlier estimate of 4.7% and at 8.6% against our estimate of 6.1% for FY08E. This is primarily on account of low tax rate of 15% as the plywood plant is located at Uttaranchal.  

 

• Revised EPS for FY07E and FY08E thus stands at INR 13.5 (vs. INR 10.6 earlier) & INR 25.7 (vs. INR 16.7 earlier) respectively.

 

• At CMP of INR 115, the stock trades at 8.5x FY07E & 4.5x FY08E revised estimates.

 

• We strongly reiterate our "BUY" recommendation.

 

Financial statements

 

 

 

 

 

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