A Chip Off The Old Block

Plywood major Greenply Industries, led by Shobhan Mittal, joint managing director and CEO, has had a stellar run on the Street, gaining 57% over the past one year to hit a 52-week high of Rs.309 on March 6. Over the same period, the benchmark Sensex has given a return of 18%.The impending arrival of the GST, the anti-dumping duty on fibre board imports and the company’s aggressive expansion plan were the key triggers.

On March 20, promoter entity Trade Combines, owned by Shobhan and Shiv Prakash Mittal, executive chairman, sold 38 lakh shares worth Rs.104 crore in a bulk deal at Rs.275.03 a share. Of this, SBI Mutual Fund’s Magnum Midcap Scheme bought 28 lakh shares for Rs.78 crore. Post the transaction, Trade Combines' holding is down to 9.5% from 12.6%. Institutional investors have been firming their holding in the counter. As on December 2016, the institutional holding was 29.55% with FIIs holding 12.7% and mutual funds holding 15.86% stake. 

Greenply is a leading player in the organised plywood market with 26% share and 30% in medium density fibre boards (MDF). MDF, which is cheaper than plywood, is witnessing increased demand from the low-cost housing segment. And Greenply is looking to cash in on the same by ramping up its MDF capacity to 540,000 cubic metres (CBM) from the current 180,000 cubic metres (CBM). The new capacity is expected to come on stream by the second half of FY19. The company is investing over Rs.700 crore for this expansion.

Analysts are bullish as they expect Greenply, with its strong brand presence and distribution network, to gain market share from  the unorganised segment. Further, the company is also benefiting from softening raw material prices. Importantly, Greenply’s balance sheet is expected to stay healthy despite the incremental capex. Its debt/equity was 0.4x in FY16 and is expected to go up marginally to 0.6x by FY19.