CMP 869.15

Target Price 947.00

ISIN: INE461C01020

JULY 22nd

2014

GREENPLY INDUSTRIES LTD Result Update (PARENT BASIS): Q1 FY15

BUYBUYBUYBUY

Index Details

Stock Data

Sector Forest Products

BSE Code 526797

Face Value 5.00

52wk. High / Low (Rs.) 917.70/300.15

Volume (2wk. Avg.) 1590

Market Cap (Rs. in mn.) 20977.80

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY14A FY15E FY16E

Net Sales 21595.18 23657.52 25786.70

EBITDA 2652.37 2978.79 3295.69

Net Profit 1144.66 1335.62 1485.01

EPS 47.43 55.34 61.53

P/E 18.33 15.71 14.13

Shareholding Pattern (%)

1 Year Comparative Graph

GREENPLY INDUSTRIES LTD S&P BSE SENSEX

SYNOPSIS

Greenply Industries Ltd is a leader in the

manufacturing and marketing of a wide range of

interior infrastructure products.

Revenue for the quarter rose by 7.55% to Rs.

5170.85 mn from Rs. 4807.92 mn, when compared

with the prior year period.

The company’s net profit Jumps to Rs. 302.29 mn

against Rs. 225.67 mn in the corresponding quarter

ending of previous year, an increase of 33.95%.

Profit before interest, depreciation and tax is Rs.

688.72 mn an increase of 17.85% YOY as against Rs.

584.39 mn in the corresponding period of the

previous year.

Earning per Share for Q1 FY15 was Rs 12.52 as

compared to Rs 9.35 in Q1 FY14.

Greenlam Exports business has grown at a CAGR of

24% over last 5 years. 47% business contribution of

laminates comes from international market.

Production of Commercial Veneers expected from

August 2014. Additionally venturing into Lumber

business (Teak Sawn Timber in FY 2015) and

Plywood (FY 2016).

Greenply Industries Ltd has started commercial

production of 'laminated wooden flooring' at the

Company's existing MDF Unit at Pantnagar,

Uttarakhand.

Net Sales and PAT of the company are expected to

grow at a CAGR of 9% each over 2013 to 2016E

respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Greenply Industries Ltd 869.15 20977.80 47.43 18.33 3.60 60.00

Century Ply boards (I) Ltd 93.05 20706.10 3.01 30.91 8.29 100.00

Rushil Décor Ltd 46.00 662.40 2.09 22.01 0.88 0.00

Oriental Veneer Products Ltd 76.55 412.60 1.03 74.32 2.82 0.00

QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q1 FY15,

Greenply Industries Ltd is leader in the

manufacturing and marketing of a wide range of

interior infrastructure products in India, reported

its financial results for the quarter ended 30th JUNE,

2014.

Rs. In million JUNE-14 JUNE-13 % Change

Net Sales 5170.85 4807.92 7.55

PAT 302.29 225.67 33.95

EPS 12.52 9.35 33.95

EBITDA 688.72 584.39 17.85

The company’s net profit Jumps to Rs. 302.29 million in 1st quarter of FY 2014-15 as against Rs. 225.67 million in

the corresponding quarter ending of previous year, an increase of 33.95%. Revenue for the quarter rose by

7.55% to Rs. 5170.85 million from Rs. 4807.92 million, when compared with the prior year period. Reported

earnings per share of the company stood at Rs. 12.52 a share during the quarter, registering 33.95% increase

over previous year period. Profit before interest, depreciation and tax is Rs. 688.72 millions as against Rs. 584.39

millions in the corresponding period of the previous year.

Break up of Expenditure

Break up of Expenditure

Value in Rs. Million

Q1 FY15 Q1 FY14

Cost of material Consumed 2863.48 2835.79

Depreciation and Amortization Expense

181.58 137.68

Employees Benefit Expenses 523.86 476.85

Purchases of Stock in Trade 321.74 325.47

Other Expenditure 929.37 888.51

Segment Revenue

Latest Updates

• Greenlam Exports business has grown at a CAGR of 24% over last 5 years. 47% business contribution of

laminates comes from international market, making the largest exporter of decorative laminates from India

for last four consecutive years.

• Exports grew by 23.57% in laminates business of Rs 315.87 crores and contributed 14.64% of the net

revenue for the year 2014. Exports contribute 48% and 47% respectively in volume & value terms to the

laminates business. The company Commenced production of Laminated Flooring during Q1 FY 2015.

• The company Launched new products to expand it’s presence in the economy plywood segment valued at

more than Rs 120000.00 mn.

• Green Panelmax Plain, Pre-Laminated and Veneered Medium Density Fibreboards (MDF) Boards are

approved for use in defence works by the Military Engineering Services

• Greenply Industries Ltd has started commercial production of 'laminated wooden flooring' at the Company's

existing MDF Unit at Pantnagar, Uttarakhand.

• Laminates Segment has increased its production to 10.76 mn sheets in FY 2014 from 10.37 mn sheets in FY

2013; achieved capacity utilisation of 104%.

• Greenply Industries (Myanmar) Pvt. Ltd. which was incorporated as a wholly-owned subsidiary of Greenply

Industries Limited for setting-up of a Veneer or Veneer-cum-Plywood Unit in Myanmar. Greenply Industries

(Myanmar) Pvt. Ltd has obtained approval of the Myanmar investment commission to set up the unit and has

completed commissioning of Veneering Line and started trial Production.

• Production of Commercial Veneers expected from August 2014. Additionally venturing into Lumber business

(Teak Sawn Timber in FY 2015) and Plywood (FY 2016). Expected to achieve Topline of USD 30 million on

optimum capacity utilization.

COMPANY PROFILE

Greenply Industries Limited (GIL) is India's largest interior infrastructure company with consolidated net sales

of Rs. 2215 crores in FY14. The company is engaged in the manufacture of decorative laminate, plywood,

decorative veneers and MDF (medium density fiberboard). The company expertise in supplying high-quality

products, provide both surface finish foundation/structural products for homes, offices and retail

establishments. Greenply markets the most comprehensive portfolio of residential and commercial floor

products available - plywood & block boards, decorative laminates, decorative veneers, and MDF under the

brand names of Greenply Plywood, Green Club Premium Ply, Greenlam Laminates, Green Decowood and Ecotec.

The company has seven state of the art manufacturing facilities across the country manufacturing products of

global standards. The company has more than 40 branches across the country and a strong channel network of

over 15000 dealers, distributors, sub-dealers and retailers.

The consistency-testifying certifications of the Company comprise ISO 9001 (quality management), ISO 14001

(environment system), ISO 18001 (health and safety) and SA 8000 (socially accountable practices).

Global Presence

Greenply brands are available in more than 100 countries (including Taiwan, Malaysia, China, Indonesia and

Russia). Besides, it acquired GIL Intercontinental Pte. Ltd., incorporated in Singapore, as a wholly owned

subsidiary company to cater to the growing ASEAN interior infrastructure market.

Products

� Plywood & block boards

� Decorative laminates

� Decorative veneers

� MDF

� Greenlam Sturdo

Subsidiary companies

� Greenlam Asia Pacific Pte. Ltd.

� Greenlam America, Inc.

� Greenlam Europe (UK) Ltd

� Greenply Trading Pte Ltd.

Greenlam Asia Pacific Pte Ltd explores new markets for laminates in South-east Asian countries. And Greenlam

America, Inc is engaged in the marketing and distribution of high-pressure laminates in North and South

America. Greenlam Europe (UK) Ltd will explore and market for the products of the Company in UK. Greenply

Trading Pte Ltd. will market the products in Singapore and its neighboring countries.

FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March 31, 2013 -2016E

GREENPLY INDUSTRIES LTD. FY13A FY14A FY15E FY16E

SOURCES OF FUNDS

Shareholder's Funds

Share Capital 120.68 120.68 120.68 120.68

Reserves and Surplus 4650.62 5710.58 6963.25 8216.63

1. Sub Total - Net worth 4771.30 5831.26 7083.93 8337.31

Non Current Liabilities

Long term borrowing 2353.44 2610.49 2881.98 3141.36

Deferred Tax Liabilities 403.35 486.09 559.00 637.26

Other Long term liabilities 84.13 81.42 79.79 82.19

Long Term Provisions 166.71 198.08 227.79 259.68

2. Sub Total - Non Current Liabilities 3007.63 3376.08 3748.57 4120.49

Current Liabilities

Short Term Borrowings 2976.57 2884.57 2754.76 2589.48

Trade Payables 2933.22 3312.60 3720.05 4092.05

Other Current Liabilities 1466.96 1714.44 1957.89 2173.26

Short Term Provisions 102.84 108.59 114.45 119.03

3. Sub Total - Current Liabilities 7479.59 8020.20 8547.16 8973.82

Total Liabilities (1+2+3) 15258.52 17227.54 19379.65 21431.63

APPLICATION OF FUNDS

Non-Current Assets

Fixed Assets

i. Tangible assets 6434.57 6785.70 7328.56 8061.41

ii. Intangible assets 83.31 67.27 79.38 88.90

iii. Capital Work in Progress 233.71 949.86 1530.12 1940.71

a)Total Fixed Assets 6751.59 7802.83 8938.05 10091.03

b) Non-current investments 175.25 312.89 475.59 618.27

c) Long Term loans and advances 433.85 577.27 738.91 901.46

d) Other non-current assets 0.06 0.00 0.00 0.00

1. Sub Total - Non Current Assets 7360.75 8692.99 10118.21 11709.48

Current Assets

Inventories 3279.14 3828.77 4354.77 4845.16

Trade receivables 3432.07 3502.79 3572.85 3608.57

Cash and Bank Balances 162.78 107.99 116.63 124.79

Short-terms loans & advances 1021.22 1092.01 1179.37 1238.34

Other current assets 2.56 2.99 3.48 4.00

2. Sub Total - Current Assets 7897.77 8534.55 9227.10 9820.87

Total Assets (1+2) 15258.52 17227.54 19379.65 21431.63

Annual Profit & Loss Statement for the period of 2013 to 2016E

Value(Rs.in.mn) FY13A FY14A FY15E FY16E

Description 12m 12m 12m 12m

Net Sales 20008.15 21595.18 23657.52 25786.70

Other Income 64.99 67.56 68.91 72.36

Total Income 20073.14 21662.74 23726.43 25859.05

Expenditure -17432.19 -19010.37 -20747.64 -22563.36

Operating Profit 2640.95 2652.37 2978.79 3295.69

Interest -607.22 -582.95 -632.50 -676.78

Gross profit 2033.73 2069.42 2346.29 2618.92

Depreciation -519.87 -575.69 -685.07 -767.28

Profit Before Tax 1513.86 1493.73 1661.21 1851.64

Tax -372.24 -349.07 -325.60 -366.62

Net Profit 1141.62 1144.66 1335.62 1485.01

Equity capital 120.68 120.68 120.68 120.68

Reserves 4648.00 5707.58 6963.25 8216.63

Face value 5.00 5.00 5.00 5.00

EPS 47.30 47.43 55.34 61.53

Quarterly Profit & Loss Statement for the period of 31st DEC, 2013 to 30th SEP, 2014E

Value(Rs.in.mn) 31-Dec-13 31-Mar-14 30-Jun-14 30-Sep-14E

Description 3m 3m 3m 3m

Net sales 5245.13 5706.86 5170.85 6024.04

Other income 12.26 18.36 3.48 2.87

Total Income 5257.39 5725.22 5174.33 6026.91

Expenditure -4575.76 -4983.10 -4485.61 -5277.06

Operating profit 681.63 742.12 688.72 749.86

Interest -144.21 -154.16 -150.68 -152.19

Gross profit 537.42 587.96 538.04 597.67

Depreciation -149.31 -147.44 -181.58 -185.94

Profit Before Tax 388.11 440.52 356.46 411.73

Tax -102.67 -72.21 -54.17 -66.29

Net Profit 285.44 368.31 302.29 345.44

Equity capital 120.68 120.68 120.68 120.68

Face value 5.00 5.00 5.00 5.00

EPS 11.83 15.26 12.52 14.31

Ratio Analysis

Particulars FY13A FY14A FY15E FY16E

EPS (Rs.) 47.30 47.43 55.34 61.53

EBITDA Margin (%) 13.20 12.28 12.59 12.78

PBT Margin (%) 7.57 6.92 7.02 7.18

PAT Margin (%) 5.71 5.30 5.65 5.76

P/E Ratio (x) 18.38 18.33 15.71 14.13

ROE (%) 23.94 19.64 18.85 17.81

ROCE (%) 29.33 28.93 28.80 28.88

Debt Equity Ratio 1.26 0.91 0.80 0.69

EV/EBITDA (x) 10.16 9.88 8.90 8.07

Book Value (Rs.) 197.58 241.48 293.50 345.43

P/BV 4.40 3.60 2.96 2.52

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs.869.15, the stock P/E ratio is at 15.71 x FY15E and 14.13 x FY16E

respectively.

� Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.55.34 and

Rs.61.53 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 9% over 2013 to 2016E respectively.

� On the basis of EV/EBITDA, the stock trades at 8.90 x for FY15E and 8.07 x for FY16E.

� Price to Book Value of the stock is expected to be at 2.96 x and 8.07 x respectively for FY15E and FY16E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.947.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

India is one of the largest markets globally for different types of furniture. It is estimated that the furniture

market in India is likely to witness a CAGR of about 30 per cent over the next three years. In fact, an independent

industry research institute and consulting firm, CSIL Milano has classified India as one of the 14 largest furniture

markets in the world due to the rising purchasing power of the more than 400 million strong middle-class

segment.

Furniture industry statistics

India’s organised furniture industry is estimated at around US$8 billion and expected to grow at a CAGR of about

25-30% annually. The modular furniture market in India was estimated to be about US$ 160 million (Source:

Index Media Consulting report). The size of the international range of premium furniture was estimated at about

US$20 million and largely serviced by foreign players and imports. India’s furniture market was concentrated in

Tier-I, Tier-II and Tier-III cities; the leading 784 urban centres contributed 41% to the total consumer furniture

market; Tier-I and Tier-II type cities accounted for 33% of the total market.

Furniture consumption in India recorded 10% average annual growth over the last decade, reaching about US$

15 billion in 2013 at retail prices. India’s organised furniture sector is marked by about 5,000 companies and

nearly 10,500 importers. India imports around US$150 million worth of furniture, catering primarily to urban

affluent households. India’s interior decor industry is heading towards high-end, low maintenance, quickly

installable and customisable products.

Branded furniture accounts for a 30% market share in India. IKEA announced intentions of investing

Rs.105000.00 mn (1.2 billion euro) following the recent policy change, which permitted 100% foreign direct

investment (FDI) in single-brand retail, which can potentially widen the sector

Opportunities and threats

Growth drivers of the industry

• Rising proportion of working age population:

India’s median age of 24 makes it a young country with a large productive workforce. Nearly two-third of

India’s population is in the working age group from 15-64 years marked by financial independence,

aspirations and access to growing disposable incomes.

• Rising incomes:

India’s per capita income was projected to increase 10.4% to Rs. 74920 in 2013-14 as the country becomes a

$1.7 trillion economy, driving consumption.

• Rising urbanisation:

India has the highest urban population rate of change among BRIC nations. The country’s urban population

accounted for 31.6% of its total population in 2012. In 2010-15, the country’s urban population is expected

to grow 2.5% above the 1.3% growth in the total population. At this rate, it is estimated that around 843

million people will live in Indian cities by 2050, offering growing opportunities for its real estate and

furniture sector.

Office furniture segment

The Indian office furniture segment is estimated at around US$ 1.6 billion, with 40% of that is generated through

the provision for desks. Other products which are mainly consumed are seating, executive furniture, cabinets and

office storage, filing systems, wall-to-wall units, furniture for communication areas.

The modular furniture market in India, estimated to be about Rs. 800 crore, is dominated by bigger players. The

market size of the international range of premium furniture is estimated to be worth about Rs. 100 crore, and is

primarily catered to by foreign players. It is expected to grow at the rate of 10-15% over the next three or four

years driven by demand from modern work spaces which includes the IT-ITeS, retail, healthcare and

infrastructure segments.

Interior infrastructure

The Indian interior infrastructure sector is growing at a CAGR of 5-7%. The plywood and laminates is a highly

fragmented industry. The share of the unorganized sector is about 78% in plywood and about 45% in laminates.

The growth registered by organised sector is 15-20%, in comparison to overall industry growth of 5%, indicates

a shift of customer preferences from unbranded to branded goods.

India’s wood panel market grew at a CAGR of 6-8% over FY08-FY12 in volume terms. There has been clear shift

of preference for branded products in the market that has led to a decline in market share for unorganized

players. Organised players have grown at 15-20% in volume terms over FY08-FY12. The organised sector

comprised 39% (MDF and particle board-100% organised; Plywood - 22% organised) with the unorganized

accounting for the rest.

India’s plywood industry comprised approximately 78% of total wood panel market and was valued at Rs.125 bn

in FY12. The industry is expected to grow at the rate of 6-8% with organised players continuing to grow at a

double-digit rate.

As far as the Indian MDF industry is concerned, it accounts for the balance 22% of the total wood panel market

and which is completely controlled by the organised players; a shift of 8-10% is expected from plywood to MDF

over the next three or four years. The investment for setting up a MDF plant is significant, which is a major entry

barrier for players from the unorganized sector. Currently, 30-35% of the MDF demand is met through imports.

India’s laminates market was valued at Rs. 40 bn in FY12. Organised players controlled around 55% of market

with the rest controlled by unorganized players. It is expected to grow in line with growth of wood panel market.

Organised players have increased their presence on account of rising aspirations and brand consciousness.

Outlook

India’s rapidly expanding economy is seeing growing affluence, both in urban and rural areas. The tremendous

penetration of the mass media has also resulted in millions of middle-class Indians aspiring for more lavish

lifestyles. Furniture-makers are catering to the unmet urban middle-class need for stylish homes in compact

apartments.

With the Indian economy and the real estate sector continuing to grow at a phenomenal pace, demand for office

and home furniture is expected to expand even further. The entry of a number of international players and the

rapid emergence of domestic brands is transforming the industry, offering the discerning Indian consumer a

wide range of home and office furniture to choose from. The furniture industry market size is expected to touch

Rs. 1120000.00mn crore by 2015.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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