(Rating: BUY, Target Rs 230, Upside 39.4%)
- Greenpanel Industries delivered an exuberant performance during Q3FY21 showcasing its top notch execution qualities with a beat on all fronts. Company's MDF division witnessed phenomenal volume growth of 43.2% y/y on the back of (1) 20-25% MDF industry growth led by pick-up in usage of ready made furniture and displacement of low end plywood by MDF combined with (2) aggressive product penetration strategies as the company increased its dealer network by ~22% during 9MFY21. This along with cost optimization and operating leverage resulted into EBITDA growth of ~105% y/y for MDF division during Q3FY21.
- Based on the sublime performance during Q3FY21, we upgrade our EBITDA estimates for Greenpanel by 28.7%/16.2%/21.2% for FY21E/FY22E/FY23E respectively. Further, we factor in sales/EBITDA/PAT CAGR of 21%/32%/89% over FY21E-FY23E. Cash flow generation would be primarily deployed towards deleveraging wherein net debt should reduce from Rs 5.45 bn in FY20 to Rs 2.02 bn by FY23E.
- We upgrade our FY23E EPS from Rs 9.4 to Rs 12.4 and accordingly upgrade our TP for Greenpanel to Rs 230 - assigning DCF derived P/E multiple of 18.5x on FY23E. We maintain our BUY rating on the stock.