Greenpanel Industries remains a compelling long-term story in India’s MDF sector, backed by capacity expansion, export incentive benefits, and a domestic growth runway. Despite short-term earnings headwinds stemming from competition and raw material inflation, Prabhudas Lilladher has reiterated its ‘BUY’ rating with a revised target price of Rs310 (down from Rs330), implying an 18x FY27E earnings valuation.

Prabhudas Lilladher Remains Positive on Stock

Prabhudas Lilladher maintains a ‘BUY’ rating on Greenpanel Industries with a revised target of Rs310, reflecting near-term earnings compression from timber inflation and intensified competition. The company’s Q4FY25 performance was muted, with revenues down 5.6% YoY, but EBITDA margins were supported by Export Promotion Capital Goods (EPCG) scheme incentives. Greenpanel projects MDF volume growth of 28% in FY26, driven by domestic expansion and a new Andhra Pradesh plant targeting thin MDF production. Despite revised lower FY26/27 earnings estimates, the brokerage sees a 70.6% PAT CAGR through FY27, underpinned by rising export margins, stabilization in timber prices, and an improving product mix.

Muted Q4FY25 Performance Weighs on Sentiment

Greenpanel reported a 5.6% YoY drop in consolidated revenue to Rs3.7 billion, missing the projected Rs4.1 billion. The MDF segment, which remains the company's core business, declined 15.4% YoY due to a 19.9% volume contraction, despite a 5.8% rise in blended realization. Domestic MDF volumes dropped 24.9%, while export volumes saw a 33.8% surge.

The plywood segment also witnessed a revenue decline of 5.3% YoY. However, it delivered better margins due to lower end-year turnover discounts, resulting in EBIT of Rs55.7 million compared to a loss of Rs17 million in Q4FY24.

Export Incentives Cushion Margin Decline

Despite top-line weakness, Greenpanel reported EBITDA of Rs480 million, down just 6.5% YoY, aided significantly by Rs350 million EPCG scheme incentives. The EBITDA margin stood at 12.8%, marginally lower than the 12.9% posted last year. The company expects another Rs510 million in EPCG benefits across FY26–27, which should help support operating profitability.

Notably, MDF EBITDA margin remained stable at 16.3%, largely protected by the incentive accruals. In contrast, plywood margin rose to 16.5%, up sharply from -4.8% in Q4FY24.

FY26 Volume and Margin Guidance Signals Recovery Ahead

Greenpanel projects total MDF volume to rise to 550k CBM in FY26 from the current 439k CBM, driven by existing capacity ramp-up and the Andhra Pradesh plant’s contribution. Domestic MDF is expected to grow at ~28% YoY, with exports forecasted at ~12% YoY. Management pegs MDF margins at 12% and plywood margins at 7–8% for FY26.

The AP plant, which started with 35% utilization, is focusing on industrial-grade thin MDF, where current domestic demand is primarily met via imports. Initial realizations are estimated at Rs25,000–26,000/CBM, 15–20% higher than standard MDF rates.

Timber Inflation and BIS Norms Add Complexity

Timber prices surged in Q4FY25, especially in southern India, where prices climbed 17.8% YoY to Rs6.2/kg, compared to a modest 2.4% rise in northern regions. The company does not expect significant price moderation until new crop arrivals in FY26, posing a near-term margin risk.

Additionally, domestic MDF volumes were hit in Q4 due to the discontinuation of non-compliant commercial grade MDF, in light of stricter BIS (Bureau of Indian Standards) QCO norms. While this compressed volumes by 6% in FY25, it also opens doors for quality-driven growth as imports dropped sharply, with just 1,100 CBM recorded in April 2025.

Capex and Strategic Outlook

Greenpanel has earmarked Rs300–350 million in capex for FY26, with Rs250 million allocated to the new AP facility, and the remainder for maintenance. The company expects this plant to align with its flagship unit in terms of value-added mix within three years.

Management is optimistic about long-term domestic demand, particularly from the organized furniture segment, which will benefit from formalization and regulatory enforcement.

Financial Snapshot and Revised Estimates

The brokerage has revised FY26/FY27 revenue forecasts to Rs17.5 billion and Rs20.6 billion respectively, lowering previous estimates by 1.7% and 5.1%. PAT estimates have also been trimmed to Rs1.04 billion in FY26 and Rs2.1 billion in FY27, indicating CAGRs of 44% and 102.2% respectively.

Here’s a concise financial summary:

Valuation and Investment Rationale

The stock is currently trading at 29.4x FY26E and 14.5x FY27E earnings, with an EV/EBITDA of 15.1x/8.4x for the same years. The reduced target price of Rs310 reflects trimmed earnings but retains upside potential from current levels of Rs249.

Prabhudas Lilladher’s continued BUY call is premised on:

Structural demand tailwinds in MDF from formal furniture.

Greenpanel’s export focus and pricing premium from thin MDF.

Normalizing timber costs in FY26.

Operating leverage from higher utilization at the AP plant.

Conclusion: Navigating Volatility with Strategic Leverage

Despite short-term margin challenges, Greenpanel’s calibrated expansion, regulatory-driven import substitution, and improved product mix offer a compelling structural story. With MDF demand set to rise and export incentives cushioning earnings, investors can look to accumulate on dips, with Rs310 as the medium-term target. Prabhudas Lilladher's analysis underscores confidence in the company’s ability to regain growth momentum and expand return metrics through FY27.