1QFY2012 Result Update | Laminates

July 19, 2011

Greenply Industries
Performance Highlights
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 1QFY2012 352.7 4QFY2011 349.6 %chg (qoq) 0.9 1QFY2011 262.4 %chg (yoy) 34.4

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Laminates 555 0.2 245 /158 12,934 5 18,654 5,614 GRPL.BO MTML@IN

`230 `326
12 Months

38.0 10.8
13.0

28.3 8.1
5.9

34.4 269bp
118.7

30.7 11.7
10.4

23.9 (92)bp
24.7

Source: Company, Angel Research

Greenply Industries (GIL) registered strong top-line growth in 1QFY2012. The companys net sales grew by 34.4% yoy and 0.9% qoq to `353cr. GIL reported 92bp yoy contraction in OPM to 10.8% mainly due to forex loss of `5cr. Net profit increased by 24.7% yoy to `13cr. We believe the company is well placed to benefit from its laminate capacity expansion, improved utilisation levels of the MDF plant and expansion in the plywood segment. Hence, we maintain our Buy view on the stock. Top line posts strong growth, margin improves qoq: For 1QFY2012, GILs top line grew by 34.4% yoy to `353cr mainly due to laminate capacity expansion, higher capacity utilisation in the MDF segment and increased realisations. EBITDA for the quarter increased by 23.9% yoy and 34.4% qoq to `38cr on the back of higher revenue. EBITDA margin increased by 269bp qoq but declined by 92bp yoy to 10.8% due to forex loss of `5cr. PAT for 1QFY2012 increased by 24.7% yoy and 119% qoq to `13cr. PAT margin increased by 198bp qoq to 3.7%. Outlook and valuation: We believe the concerns related to the MDF segment

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 55.0 10.7 9.3 25.0

have receded considerably. Hence, higher utilisation levels in the MDF segment will aid in improving GILs overall margins on a qoq basis going ahead. The MDF segment is expected to achieve 45% utilisation in FY2012. Further, the company is well placed to benefit from 1) its laminates capacity expansion, which increased nearly two-folds in FY2010 and is expected to achieve 100%+ utilisation in FY2012 and 2) expansion of its plywood capacity by 3.75mn sq. ft., which is expected to contribute around `45cr to FY2012 top line. At `230, the stock trades at 5.6x FY2013E earnings. We maintain our Buy rating with an upgraded target price of `326, valuing the stock at 8x FY2013E earnings.
Key financials
Y/E March (` cr) Net Sales % chg Net Profit % chg FDEPS (`) EBITDA Margin (%) P/E (x) P/CEPS (x) RoE (%) RoCE (%) P/BV (x) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

Abs. (%) Sensex Greenply

3m (2.4) 14.9

1yr 4.0 20.3

3yr 36.8 67.8

FY2010 871 20.2 49.6 32.9 20.5 11.6 10.2 7.1 21.9 13.7 1.9 1.0 8.9

FY2011 1,217 39.6 25.1 (49.4) 10.4 9.0 22.1 8.4 8.4 9.4 1.7 0.8 8.8

FY2012E 1,383 13.7 75.2 199.9 31.2 12.5 7.4 4.7 21.0 17.0 1.4 0.6 5.2

FY2013E 1,498 8.3 98.4 30.8 40.8 13.0 5.6 3.9 22.4 19.4 1.1 0.5 4.1

Sharan Lillaney
Tel: 022-3935 7800 Ext: 6811 sharanb.lillaney@angelbroking.com

Please refer to important disclosures at the end of this report

Greenply Industries | 1QFY2012 Result Update

Exhibit 1: 1QFY2012 Performance highlights

Particulars (` cr) Net Sales Total Expenditure EBITDA OPM (%) Depreciation EBIT Interest Other Income PBT Tax Net Profit NPM (%) Diluted EPS (`)
Source: Company, Angel Research

1QFY2012 352.7 314.7 38.0 10.8 11.3 26.7 12.0 14.6 1.7 13.0 3.7 5.4

1QFY2011 262.4 231.7 30.7 11.7 9.9 20.8 8.7 12 1.7 10.4 4.0 4.3

%chg (yoy) 34.4 35.8 23.9 (92)bp 15.0 28.1 37.8 21.0 (1.4) 24.7 (29)bp 24.7

4QFY2011 349.6 321.3 28.3 8.1 10.5 17.7 10.9 6.8 0.9 5.9 1.7 2.5

%chg (qoq) 0.9 (2.1) 34.4 269bp 7.7 50.3 10.6 113.5 118.7 198bp 118.7

FY2011 1,216.9 1,107.3 109.6 9.0 41.0 68.6 37.8 0.0 30.9 5.8 25.1 2.1 10.4

FY2010 871.4 770.7 100.7 11.6 22.0 78.7 23.7 1.9 57.0 7.4 49.6 5.7 22.4

%chg (yoy) 39.6 43.7 8.8 (255)bp 86.0 (12.8) 59.5 (99.9) (45.8) (22.1) (49.4) (363)bp (53.7)

Revenue up 34.4% yoy due to strong volume growth: For 1QFY2012, GILs top line reported 34.4% yoy growth to `353cr mainly on the back of laminate capacity expansion, higher capacity utilisation in the MDF segment and increased realisations during the quarter. The plywood segment reported 106% capacity utilisation and realisation increased to `227/sq. mt. from `223/sq. mt. qoq and `198/sq. mt. yoy. The segment witnessed a 4.2% yoy increase in volumes. The laminate segment reported an average of 98% capacity utilisation. Average realisation of laminates increased to `505/sheet in 1QFY2012 from `492/sheet in 4QFY2011 and `471/sheet in 1QFY2011. The segment witnessed a 14.9% yoy increase in volumes. The MDF segment witnessed its highest-ever utilisation during 1QFY2012. The segments utilisation stood at 49.3%, with production volume of 22,179m3 and sales volume of 24,116m3.

July 19, 2011

Greenply Industries | 1QFY2012 Result Update

Exhibit 2: Robust growth in sales

(` cr) 400 350 300 250 200 150 100 50 0 1QFY2011 2QFY2011 3QFY2011 4QFY2011 1QFY2012 Net Sales (LHS)
Source: Company, Angel Research

(%) 60 350 317 289 262 30 20 10 0 Growth (qoq) Growth (yoy) 353 50 40

OPM expands qoq on the back of higher utilisation

The companys EBITDA improved by 23.9% yoy to `38cr on the back of higher revenue during the quarter. OPM for the quarter contracted by 92bp yoy but improved by 269bp qoq due to higher utilisation in the MDF segment and lower forex loss compared to 4QFY2011. Forex losses stood at `5cr vs. `9cr in 4QFY2011. Depreciation/appreciation of one rupee vs. the euro can result in loss/profit of `2cr to the company.

Exhibit 3: OPM improving on the back of higher utilisation

(%) 14 12 10 8 7.8 6 4 2 0 1QFY2011 2QFY2011 3QFY2011 4QFY2011 1QFY2012 11.7 10.8 9.2 8.1

Source: Company, Angel Research

July 19, 2011

Greenply Industries | 1QFY2012 Result Update

Bottom line increases on account of higher revenue

GILs net profit increased by 24.7% yoy and 119% qoq to `13cr, largely due to higher revenue during the quarter. PAT margin also improved qoq by 198bp to 3.7% on the back of qoq expansion in OPM.

Exhibit 4: Highest PAT in the last five quarters

(` cr) 14.0 12.0 10.0 8.0 5.9 6.0 4.0 2.0 1QFY2011 2QFY2011 3QFY2011 Net Profit
Source: Company, Angel Research

13.0 10.4 8.2

(%) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 -

1.6

4QFY2011 NPM

1QFY2012

July 19, 2011

Greenply Industries | 1QFY2012 Result Update

Investment arguments
Banking on MDF and laminates
GIL has forayed into the lucrative, high-growth MDF market, with the largest MDF plant in India (1,80,000m3/year capacity), while benefiting from its strong expansion in laminates (88% capacity expansion). GIL is witnessing strong demand for its laminate products, with both its new production lines running at full capacity. The MDF opportunity is especially huge MDF constitutes 20% of wood panel consumption in India, while plywood constitutes 80% the reverse holds true globally. China alone consumes about 10mn11mn m3/year of MDF vs. 0.6mn m3/year in India. Going forward, with a strict control on the issue of new plywood licenses and a 57% CAGR in panel demand, MDF is likely to meet this demand, translating into a 2530% CAGR for MDF. Moreover, even out of the present consumption, 80% is being met through imports, which GIL can substitute, given the high freight costs and 25% anti-dumping duty on imports.

Strong brand, high ad spend and massive distribution

GIL has leading plywood and laminates brands, supported by ad spend as high as 4.3% of sales. The company also has the largest distribution network of over 15,000 dealers. These advantages underpin the strong RoE profile of the company's brand-driven business model (20% over FY201012E).

Outlook and valuation

We believe the concerns related to the MDF segment have receded considerably. Hence, higher utilisation levels in the MDF segment will aid in improving GILs overall margins on a qoq basis going ahead. The MDF segment is expected to achieve 45% utilisation in FY2012. Further, the company is well placed to benefit from 1) its laminate capacity expansion, which increased nearly two-folds in FY2010 and is expected to achieve 100%+ utilisation in FY2012 and 2) expansion of its plywood capacity by 3.75mn sq. ft., which is expected to contribute around `45cr to FY2012 top line. At `230, the stock trades at 5.6x FY2013E earnings. We maintain our Buy rating with an upgraded target price of `326, valuing the stock at 8x FY2013E earnings.

Exhibit 5: Key assumptions

(%) Sales growth Capacity utilisation Plywood - Laminates - MDF Operating margin
Source: Company, Angel Research

Estimates FY2012 FY2013 13.7 8.3 115.0 110.0 45.0 12.5 115.0 115.0 60.0 13.0

July 19, 2011

Greenply Industries | 1QFY2012 Result Update

Profit and Loss Statement

Y/E March (` cr) Net Sales % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel Other EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of Associates Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earnings of associate Less: Minority interest (MI) Prior period items PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY2009 725 33.8 646 409 38 59 141 79 (2.1) 10.9 (17) 62 (8.3) 8.5 (20) 2 0.0 44 (11.6) 44 7 15.9 37 37 37 (3.7) 5.1 21.9 21.9 (3.7) FY2010 871 20.2 771 478 52 77 164 101 27.7 11.6 (22) 79 27.3 9.0 (24) 2 0.0 57 28.5 57 7 13.0 50 50 50 32.9 5.7 22.4 20.5 2.2 FY2011 FY2012E FY2013E 1,217 39.6 1,107 692 89 103 224 110 8.8 9.0 (41) 69 (12.8) 5.6 (38) 0 0.0 31 (45.8) 31 6 19.5 25 25 25 (49.4) 2.1 10.4 10.4 (53.7) 1,383 13.7 1,210 769 76 124 241 173 57.7 12.5 (43) 130 88.7 9.4 (36) 0 0.0 94 204.7 94 19 20.0 75 75 75 199.9 5.4 31.2 31.2 199.9 1,498 8.3 1,303 825 82 135 261 195 12.6 13.0 (46) 149 15.2 10.0 (26) 0 0.0 1 123 30.8 1.0 124 25 20.0 99 99 99 30.8 6.6 40.8 40.8 30.8

July 19, 2011

Greenply Industries | 1QFY2012 Result Update

Balance Sheet
Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Inventories Debtors Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 270 74 196 52 3 2 386 16 69 166 135 188 198 0 451 632 92 539 13 3 4 426 19 56 200 151 288 137 1 699 673 133 540 3 4 560 13 61 262 225 347 214 761 690 177 514 3 4 620 11 64 299 247 374 246 767 725 222 503 3 4 664 10 64 323 267 405 258 768 8 172 181 258 13 451 11 261 272 407 19 699 12 310 322 420 19 761 12 381 393 355 19 767 12 475 487 262 19 768 FY2009 FY2010 FY2011 FY2012E FY2013E

July 19, 2011

Greenply Industries | 1QFY2012 Result Update

Cash Flow Statement

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations Inc./ (Dec.) in Fixed Assets Inc./ (Dec.) in Investments Inc./ (Dec.) in loans and advances Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2009 44 17 (26) 2 7 26 (90) 3 (18) 2 (103) 87 (3) (0) 84 7 9 16 FY2010 57 22 49 2 7 118 (324) (2) 13 2 (311) 46 149 (4) 4 195 3 16 19 FY2011 FY2012E 31 41 (82) 0 6 (16) (28) (5) 0 (33) 29 13 (4) 6 43 (6) 19 13 94 43 (32) 0 19 87 (17) (3) 0 (20) (65) (4) 1 (68) (2) 13 11 FY2013E 123 46 (15) 0 25 129 (35) 0 (35) (93) (4) 1 (96) (2) 11 10

July 19, 2011

Greenply Industries | 1QFY2012 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/E (on basic, reported EPS) P/CEPS P/BV EV/Sales EV/EBITDA Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Asset Turnover (Net Block) Asset Turnover (Total Assets) Operating Income / Invested Capital Inventory Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Gross debt to equity Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Interest) 1.4 1.3 3.1 3.1 1.5 1.4 3.9 3.3 1.3 1.3 3.7 1.8 0.9 0.9 2.0 3.6 0.5 0.5 1.3 5.7 2.9 3.9 1.9 1.9 78 58 82 81 1.9 2.3 1.5 1.6 77 60 97 63 1.9 2.2 1.7 1.7 69 56 92 48 2.0 2.6 1.8 1.8 74 62 91 57 2.1 2.9 2.0 2.0 76 63 91 59 15.8 17.6 22.7 13.7 15.0 21.9 9.4 9.7 8.4 17.0 17.2 21.0 19.4 19.7 22.4 8.5 84.1 1.9 13.7 7.7 1.3 21.7 9.0 87.0 1.6 12.3 6.2 1.5 21.3 5.6 80.5 1.7 7.7 7.4 1.4 8.3 9.4 80.0 1.8 13.8 7.3 1.1 20.8 10.0 80.0 2.0 15.8 6.8 0.7 22.0 21.9 21.9 32.0 1.5 106.4 22.4 20.5 32.4 1.5 123.3 10.4 10.4 27.4 1.5 133.5 31.2 31.2 49.1 1.5 162.9 40.8 40.8 59.6 1.5 201.9 FY2009 FY2010 FY2011 FY2012E FY2013E

10.5 10.5 7.2 2.2 0.9 8.0

11.2 10.2 7.1 1.9 1.0 8.9

22.1 22.1 8.4 1.7 0.8 8.8

7.4 7.4 4.7 1.4 0.6 5.2

5.6 5.6 3.9 1.1 0.5 4.1

July 19, 2011

Greenply Industries | 1QFY2012 Result Update

Research Team Tel: 022 - 3935 7800

E-mail: research@angeltrade.com

Website: www.angeltrade.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Greenply Industries No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns) :

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

July 19, 2011

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