Anand Rathi Share and Stock Brokers Limited has suggested a ‘BUY’ Call on Greenply Industries, setting an upwardly revised 12-month target price of Rs427. Notwithstanding a modest Q1 FY26, the brokerage is optimistic about a rebound, citing robust prospects for the company’s Medium Density Fibreboard (MDF) segment, a forthcoming recovery in consumer demand, and effective capex allocation. The brokerage’s strategic outlook derives from meaningful revenue, margin, and earnings growth expected over the coming three years.

Strong Growth Potential for Greenply Industries

In a comprehensive research note, Anand Rathi Share and Stock Brokers Limited maintains a ‘BUY’ recommendation on Greenply Industries, projecting a 12-month target of Rs427 per share after a subdued Q1 FY26. The firm anticipates a multi-year earnings revival, predicated on an improved product mix tilted toward high-margin MDF, timely capacity expansion, and normalization of raw material costs. Short-term challenges in the plywood vertical and working capital pressures are expected to be temporary, with segmental recovery and festive-season demand poised to lift results. The outlook calls for 13% CAGR for revenue and an exceptional 51% CAGR for earnings through FY25-28.

Greenply’s Q1 FY26 Performance: A Brief Analysis

Soft topline expansion, margin stability, and temporary profit compression:
The company posted a 2.9% year-on-year revenue increase to Rs6 billion. Compared to expectations, this was below par, largely due to tepid plywood segment performance. Easing input costs, however, contributed to a robust 205bps expansion in gross margin to 42.8%. Despite higher employee and operating expenses eroding incremental gains, EBITDA margin still ticked up 34bps to 10.3%. Notably, adjusted PAT fell 27.6% YoY to Rs240 million, pressured by intensified JV/subsidiary losses and a hefty 77.9% YoY surge in interest expense, lightly cushioned by a 129.3% jump in other income.

Segmental Dynamics: MDF Shines While Plywood Falters

MDF emerges as the growth anchor:
The MDF business grew 11.8% YoY, driven by higher volumes and realizations (Rs31,763/cu.mtr, up 3.1%). Sales reached 46,350 cu. mtrs, boosting revenue to Rs1.5 billion. EBITDA in this segment rose 16.4% YoY to Rs256 million, with margins steady around 17%. PAT for MDF surged 86% to Rs80 million, exhibiting strong operational leverage.

Plywood grapples with demand blues:
Conversely, plywood sales volume dropped 3.4% YoY to 17.1 million sq. mtrs, offset only in part by a 4.1% increase in realizations. Segment revenue was nearly flat at Rs4.5 billion, with core EBITDA up just 1.4% to Rs360 million and PAT down a sharp 37.9% YoY to Rs205 million. Weak demand and liquidity constraints—aggravated by delayed channel payments and seasonality—have weighed heavily, but the management foresees a rebound during the festive season.

Guidance Revision and Management Commentary

Plywood growth forecast trimmed; MDF outlook robust:
Anticipating prolonged demand recovery, Greenply’s management has cut volume growth guidance for plywood to low single digits. MDF, meanwhile, maintains high-teen volume growth forecasts and is expected to deliver steady ~16% EBITDA margins in FY26.

Capacity expansion and product diversification:
The Vadodara MDF plant, running at approximately 90% utilization, is slated for capacity augmentation and will begin HDF flooring output by September 2025 with a planned capex of Rs100–120 million. Total FY26 capex is pegged at Rs1.5 billion, covering upgrades across MDF, plywood (Odisha plant), and the setup of new PVC/WPC manufacturing, aimed at increasing sales from in-house production and improving value chain control.

Financial Highlights and Valuations

Below is an HTML table summarizing Greenply’s forward financial metrics, illustrating its improving outlook and attractive valuations:

Target Price, Valuation, and Stock Levels

Target and valuation profile:
Anand Rathi reaffirms its ‘BUY’ on Greenply, issuing a higher 12-month target price of Rs427, valued at 22.5 times the average of FY27E and FY28E EPS. This represents substantial upside from the current level of Rs330. The stock trades at a compelling forward P/E of 15.5x for FY28E. Investors are encouraged to accumulate the stock, as medium-term tailwinds could catalyze further rerating.

Key levels to monitor:

• 12-month target price: Rs427
• Current price (as of report date): Rs330
• 52-week trading range: Rs412–245
• Market capitalization: Rs42 billion
• Support: Rs300–310; Resistance: Rs400–412

Strategic Risks and Industry Context

Potential headwinds:
Greenply faces industry risks, including economic slowdowns that could dampen real estate-driven demand, persistent raw material supply constraints (notably timber), and heightened competition from both domestic suppliers and MDF imports. Margin pressures could arise if supply-demand balances tip unfavorably.

Long-term tailwinds:
Medium-term MDF industry growth is pegged at 15-20% annually, underpinned by low penetration and a policy push for domestic furniture manufacturing. The formalization agenda (BIS implementation) is likely to benefit established players like Greenply, positioning the firm for sustained market share gains.

Bottom Line: Investment Thesis

With clarity in execution strategy, capex discipline, and portfolio diversification towards value-accretive businesses, Greenply Industries is on track for a multi-year upswing in profitability. Anand Rathi’s ‘BUY’ call and raised target price reflect conviction in the company’s turnaround and structural tailwinds in India’s wood panels market. Investors should closely watch festive demand, MDF capacity ramp-up, and working capital cycles as key near-term drivers.