In a confident reaffirmation of its bullish stance, Choice Equity Broking has reiterated its ‘BUY’ rating on Greenply Industries Ltd, setting a revised 12-month target price of Rs 423 per share, implying a potential upside of 40.4% from current levels. The research is grounded in a PEG ratio valuation framework and supported by improving volume growth across both plywood and MDF segments, robust margin expansion, and a high-growth joint venture. Despite short-term risks such as input cost pressures and regulatory delays, Greenply appears well-positioned for accelerated earnings growth through FY28.

Volume Growth to Outpace Industry Average

Greenply is expected to deliver volume growth of 9.7% CAGR over FY25–28E in its plywood segment—well above the industry average of 7%. This gain is driven by rising market share from unorganized players, multiple price hikes, and a strategic focus on capacity expansion.

FY25 plywood volume reached 75.9 million Sqm, up 5.5% YoY.

Management targets 82.7 million Sqm volume in FY26, with a double-digit growth outlook and EBITDA margin guidance of over 10%.

Margins Strengthen Across Segments in Q4FY25

In Q4FY25, Greenply reported a healthy margin beat, even as volumes remained modest:

EBITDA for Q4FY25: Rs 681 million, up 18.1% YoY and 26% QoQ.

EBITDA margin: 10.5%, ahead of estimates.

Gross margin: Improved by 297 bps YoY to 41.5%.

PAT: Adjusted profit rose 34% YoY to Rs 382 million.

These metrics underline improved realizations and operational efficiency, despite the cost pressures from timber price inflation.

MDF Segment Expansion and Strategic Price Management

Greenply’s Medium-Density Fiberboard (MDF) business continues to anchor long-term profitability.

FY25 MDF volumes hit 218,743 CBM, up from 168,264 in FY24.

FY26 volume expected to rise 18% to 258,117 CBM.

EBITDA margin for MDF is forecast to rise to 16% in FY26, from 15% in FY25.

Timber costs were well-managed at Rs 6.3/kg, and Greenply moderated price hikes to stay competitive—cutting prices by 1.5–2% in April 2025, against the industry’s 5% cut.

Additionally, daily capacity is set to increase 25% (from 800 CBM to 1,000 CBM) post a planned monsoon shutdown.

BV Samet JV to Accelerate Revenue from FY26

The company’s joint venture with BV Samet—a global furniture fittings major—is progressing in three phases:

Phase 1 launched in November 2024.

Full product line imports under Phases 2 and 3 are underway.

The JV is projected to add Rs 1,500 million in revenue by FY26, with cash breakeven expected in the same year and PBT breakeven by FY27.

This diversified revenue stream adds strategic depth to Greenply’s building materials portfolio.

PEG-Based Valuation Offers Conservative Yet Scalable Upside

Greenply is now valued using a PEG ratio-based framework—a more dynamic method that incorporates earnings growth potential.

Additionally, at the target price, FY27E implied multiples are:

EV/EBITDA: 14.2x

P/BV: 4.6x

P/E: 25.8x

These remain reasonable and grounded in realistic assumptions.

Risks: BIS Norm Delays and Timber Cost Volatility

Despite a strong structural outlook, Choice Broking notes several execution and macro risks:

Timber prices rose 60–70 bps in Q4FY25.

Delays in BIS (Bureau of Indian Standards) norms affected inventory levels and led to short-term disruptions in both plywood and MDF segments.

Real estate or home improvement demand slowdowns could temper the growth trajectory.

Nonetheless, inventory build-up is seen as temporary, with management confident of liquidation in the next six months.

Key Financial Metrics (FY25–FY28E)

Long Term View: Structural Growth Story Backed by Execution and Margin Leverage

Greenply Industries appears well-positioned for multi-year growth across product segments, supported by strategic capex, volume acceleration, and high-margin diversification. Choice Broking’s confidence in Greenply’s structural potential is reinforced through its PEG-based valuation model and robust operational metrics.

While short-term concerns persist—especially around costs and regulatory flux—the long-term investment case remains resilient and attractive, with a projected 42% earnings CAGR offering investors a compelling risk-reward tradeoff.